What is a balance sheet?

A balance sheet is a financial statement that provides a snapshot of an individual's or organization's financial position at a specific point in time. It displays the assets, liabilities, and net worth, allowing users to see what they own versus what they owe. By listing assets, such as cash, real estate, and investments, alongside liabilities like loans, credit card debt, and mortgages, a balance sheet effectively shows the overall financial health of the entity.

The net worth, calculated by subtracting total liabilities from total assets, indicates whether the entity is in a positive or negative financial position. This information is crucial for making informed decisions regarding investments, budgeting, and long-term planning.

Other options, while related to personal finance, focus on different financial tools or documents. Tracking monthly spending involves budgeting and expense management, cash flow overviews relate to cash management and understanding inflows and outflows, and legal documents about debt repayment typically refer to agreements and contracts. However, none of these provide the comprehensive view of financial status that a balance sheet does.