In the field of economics and accounting, and within economic and financial analysis, there is an element known as the balance sheet, whose clear purpose is to analyse the financial position — all the elements that make up the organisational unit. For its initial development, the following formula has been drawn up:

Elements of the balance sheet

As can be seen from the formula above, the balance sheet is made up of the following elements: the property, rights and obligations that the company holds at a given moment.

• Property (assets held): The set of items the company has been able to purchase, such as machinery, furniture, buildings, and so on.

• Rights (receivables): Debts of third parties towards our organisation; for example, if we have sold a product and not yet collected payment, we have the right to do so.

• Obligations (payables): The opposite case to rights, when it is the company that owes a debt to one or more other organisations. For example, when we buy a product and have not yet paid for it, the other company has the right to collect payment.

From the formula above we can also observe that both property and rights make up the company’s assets, whereas obligations make up its liabilities. To view this in a somewhat simplified way, we can say that the assets reflect the investments the company has made, and the liabilities reflect the funds the company has used to make those investments. We can see this as an example in the following table:

This table represents an example of the balance sheet of a company X at a date X, in which we can see that its main characteristics are: it is expressed in monetary units, it refers to a specific date, and total assets equal total liabilities — which is where the name “balance” comes from. From this table we can sense the emergence of a new formula, which tells us that:

• Assets: The property, rights and other resources available to a company.

• Equity (net worth): The difference between a company’s assets and its liabilities.

• Liabilities: The debts and obligations with which an organisation finances its activity and which serve to support its assets.