A balance sheet includes which three components?

The balance sheet is a financial statement that provides a snapshot of an individual’s or organization's financial position at a specific point in time. The three primary components of a balance sheet are assets, liabilities, and net worth (also referred to as owner's equity).

Assets are what the individual or organization owns and can include cash, real estate, inventory, and investments. Liabilities represent what is owed, such as loans, mortgages, and outstanding bills. The net worth is calculated as the difference between assets and liabilities, essentially reflecting the overall financial health of the entity.

This foundational understanding is critical in financial counseling as it provides a clear picture of financial stability and allows for informed decision-making regarding budgeting, investing, and planning for future financial goals.

In contrast, the other options mention components that do not belong on a balance sheet. Revenue, expenses, and profit are elements typically found in the income statement, which details a company’s performance over a specific period. Cash flow, investments, and expenses are more closely related to cash flow statements and income statements rather than a balance sheet. Lastly, assets, income, and expenses mix components from different financial statements, lacking the clarity and structure that the balance sheet provides with its distinct focus on assets, liabilities,