A balance sheet is a financial document that details the assets, liabilities and net worth of an individual. Balance sheets are commonly used in sole proprietorships, business partnerships and corporations. A balance sheet is also essential for real estate investors and may be required by bankers as a part of the lending process. Because a balance sheet lists the assets and liabilities of an individual, it provides an exact figure for a person’s net worth. A person’s net worth on a balance sheet is also referred to as equity when it comes to real estate investing. As an easy way to picture a balance sheet, it is simply a sheet that balances a person’s assets with his or her liabilities to provide the total worth. Assets minus any liabilities are equal to the net worth or equity. Often real estate investors use balance sheets because much of their worth is tied up in properties.
