This tool will help you do an inventory of your assets, i.e., what you own - home, car, investments, etc. - and your liabilities, i.e., what you owe - loans, credit card balances, etc., at a specific point in time. The difference between your assets and your liabilities is what you're worth, your capital.
Depending on your situation, you can prepare your balance sheet once a year or quarterly. It is often a prerequisite for submitting a loan application, and it enables you to check changes in your net worth when you review it on a regular basis.
In drawing up your balance sheet, be sure to identify all your property and be realistic about its value. Then note all the loans you have taken out and enter the amount to be repaid.