It is an analysis of a company's liabilities, assets and equity. The analysis is generally conducted at intervals of time that is set, such as quarterly or annually. Balance sheet process is used to derive actual figures about assets, liabilities and figures of the company.
Before we get into analysing a balance sheet, you have to understand that a limited partnership, limited liability company or corporation differs greatly from a normal household balance sheet. This is because there are many items that are complex in the accounting records of a holding company or operating enterprise. Businesses deal with all kinds of tough questions that most people don't. For instance, accounting for the power plant construction expenses or how to translate multiple currency liabilities and assets back to reporting currency.
Nonetheless, no matter how overwhelming things might look at first sight when you decide to break it into different parts you will notice that there's nothing particularly hard about any of it. Generally, the best way of doing that is to know that the whole reason for the balance sheet is answering 3 questions for the manager: regulator, lender, investor or other interested parties who are looking at it.
From the balance sheet, you can learn the following: