The Balance Sheet is a financial snapshot of the business on any given date. It is called the Balance Sheet because it reports on Assets, Liabilities, and Equity, and the total account balances in these categories must balance according to the following formula:
Assets = Liabilities + Owner's Equity
The formula can be read as follows: The total assets of a company equal the portion of the assets that the creditors own (Liabilities), plus the portion of the assets that the owners or stockholders fully own (Equity).
The balance sheet equation can also be written as Equity = Assets - Liabilities, and is often better understood by beginners in this form.