Importance of Balance Sheet

1. It shows the financial position of the organization for a certain period by showing details about capital, assets and liabilities.
2. It helps to test the liquidity position of the organization by providing necessary infomation for the calculation of liquidity ratios.
3. It also helps to know solvency position i.e., long term loan paying ability of a firm.
4. It shows capital structure i.e. the position of owner's capital, shareholder's capital and borrowed capital of a firm.