What the hell is a Balance Sheet? For People Who Couldn’t Care Less About Finance (In 3 minutes)

The one the bank cares about

To understand businesses, you need to understand financial statements — even if you couldn’t care less about finance.

At first glance, there’s a lot going on. There’s the P&L and there’s the Cash Flow.

Bringing it all together is the Balance Sheet — the one the bank cares about.

The good thing is, it’s really straightforward.

Here’s everything you need to know about the Balance Sheet — in 3 minutes.

A snapshot

Over here, we talked about how much money your business makes (let’s say you’re renting out a flat on Airbnb) — and whether you’ve got cash left.

The P&L and the Cash Flow are both showing what’s going on over time — usually a year or a month.

The Balance Sheet is more like a screenshot of your bank account at a point in time — like the end of the year.

A balancing sheet

The Balance Sheet has two halves — and they’re always the same (they ‘balance’).

The top half is how much you own.