The balance sheet is a company's list of belongings

STEP 1Assets = liabilities + equity

Every number on a balance sheet rests on a one-line formula. Let's get that formula into your hands first.

What you own, and who owns that money

Say a friend lives in a KRW 300 million apartment. But if KRW 200 million of it is a bank loan and only KRW 100 million is the friend's own money, the friend's real wealth is KRW 100 million. The KRW 300 million apartment is the asset, the KRW 200 million bank loan is the liabilities, and the friend's KRW 100 million share is the equity. A company works the same way. Everything the company owns (cash, inventory, factories) is called assets, and the right side shows where the money to acquire those assets came from. Money borrowed from others that must be repaid someday is liabilities; the shareholders' share, made up of money they put in and profits the company has retained, is equity.

That is why a balance sheet always satisfies assets = liabilities + equity. The left side says 'what form the money is in now' and the right side says 'whose money it is', so the same money is recorded twice. Written the other way around, equity = assets − liabilities, that is, what is left after subtracting what you owe from what you own: net worth. That is why equity is also called net assets.

A photo taken on a single day

In Lesson 1 we said the balance sheet is a "photo." That's why a single date such as "as of 2025.12.31" is written at the top of the table. If the income statement is a video showing how much was earned over one year, the balance sheet shows what shape the company's wealth is in on the day that year ended. So balance sheet figures are "balances." Borrowings of KRW 2 billion are "debt still outstanding on that day," not the total borrowed during the year. Because it is a photo, a single one is easy to misread. A company may have just repaid debt at year-end and look tidy, so it's important to get in the habit of looking at the three years of photos placed side by side in the annual report.

STEP 2When a transaction happens, both sides move together

Whenever something happens at a company, the left and right sides of the balance sheet always move together. That's why the two sides never fall out of balance.

Not a scale, but two faces of the same money

What happens if the company borrows KRW 1 billion from a bank and buys an oven? On the left, the oven (property, plant and equipment) rises KRW 1 billion, and on the right, borrowings (liabilities) rise KRW 1 billion. Assets become KRW 11 billion, liabilities KRW 5 billion, and equity stays at KRW 6 billion. The company looks bigger, but the shareholders' share has not grown by a single won. Conversely, if selling bread leaves a profit of KRW 1.2 billion, cash rises on the left and retained earnings (equity) rise on the right. This time the shareholders' share grows. If a KRW 300 million dividend is paid, retained earnings fall by as much as the cash that goes out.

In this way, every transaction changes both sides by the same amount. Accountants call this principle double-entry bookkeeping, but as an investor you only need to remember one question rather than the name: "If assets grew, did that money come from other people's money or from my own?" Even for the same increase in assets, the meaning is the opposite depending on whether it grew through debt or through earned money.

See it in a chart: stacking blocks

Press the buttons to trigger the transactions one by one. Check whether the height of the asset block on the left is always the same as the liabilities and equity block on the right.

STEP 3Reading Robin Bakery's balance sheet line by line

Now let's break the big blocks into pieces. A real balance sheet has dozens of lines, but the reading order is always the same.

Current and non-current: the one-year line

A balance sheet further splits assets and liabilities into two groups. Assets that will normally turn into cash within a year (or within the company's normal operating cycle) are current assets, and assets used for longer are non-current assets. Likewise, liabilities due within a year are current liabilities, and those due later are non-current liabilities. The reason this line matters is simple: to avoid a cash crunch right now, the money that will become cash within a year (current assets) must be comfortably larger than the money owed within a year (current liabilities). Robin Bakery has KRW 3 billion in current assets and KRW 2 billion in current liabilities, so it has a 1.5x cushion. This ratio is the current ratio from Lesson 10.

Don't be intimidated if names and order differ a little

The balance sheet used to be called the "balance statement" (an older Korean term) in older usage. If you see that name in old materials or news, just think of it as the same table. The line names on actual balance sheets differ a bit by company. Some companies write trade receivables as "trade and other receivables," and split borrowings into "short-term borrowings" and "current portion of long-term debt." At first, don't try to memorize the detailed line names; look first for the bold total lines (current assets, non-current assets, total assets, current liabilities, non-current liabilities, total liabilities, total equity). Writing just these seven lines side by side for three years shows how the company's size changed and whether it grew on other people's money or its own. The detailed lines are where you go down to find the cause when a total moves strangely.

See it in a chart: tap each line

This is Robin Bakery's balance sheet. Tap a line to see what it is and in which lesson you'll study it in detail.

Find it yourself on DART

A real company's balance sheet is in the annual report under III. Financial Matters, at 2. Consolidated financial statements → 2-1. Consolidated balance sheet (the difference between consolidated and separate is in Lesson 11). Below is the screen we opened in Lesson 3. It isn't meant as a suggestion to pick that company, but as a guide example of what the table looks like.

1234

1. 1In the left table of contents, tap 2-1. Consolidated balance sheet.
2. 2Check the unit first. Here it is millions of won, so 227,062,266 is about KRW 227 trillion.
3. 3Look at total current assets first. The lines below it are the breakdown of current assets.
4. 4Look at total non-current assets (about KRW 287 trillion). Scroll down and it continues with total assets, liabilities and equity, in that order.

Screen: DART, Samsung Electronics annual report filed 2025.03.11 (56th term, as of 2024.12.31), consolidated balance sheet. This is a guide example, not an investment recommendation.

How to use it in investing

When reading a balance sheet for the first time, look at three big lines before the detailed ones: total assets, total liabilities and total equity. Then place three years side by side and ask, "if assets grew, which of liabilities and equity grew with them?" A company whose assets grow from earned money (retained earnings) and one whose assets grow from debt may look the same on the surface but have different stamina. Equity also connects to the yardsticks used to judge stock prices. Divide KRW 6 billion of equity by 2 million shares and you get book value per share (BPS) of KRW 3,000, and a share price of KRW 9,000 is 3 times that. The P/B in Economics Lesson 37 comes straight from this number.

It isn't always so. The balance sheet uses amounts recorded in the books (book value), which can differ from the actual market value of land or a brand. Also, normal structures differ by industry, and in some industries, like banks, very high liabilities are normal.