Balance Sheet
The “balance
sheet” is the financial statement that lists account balances on a given date. The important thing to remember is that it represents a single moment in time. The statement is referred to as the “balance
sheet” because it presents balances in the asset, liability, and equity
accounts at the end of business on a certain date. The balance sheet lists assets such as bank
deposits, accounts receivable, inventory, and equipment, as well as liabilities
like loans and accounts payable.
“Equity” is the difference between the assets and the liabilities of a business; equity can also be described as “what you own, less what you owe.” So, the formula for a balance sheet is as follows:
“Equity” is the difference between the assets and the liabilities of a business; equity can also be described as “what you own, less what you owe.” So, the formula for a balance sheet is as follows:
assets
- liabilities = equity, or
assets
= liabilities + equity.
The balance
sheet actually contains two “sides” or two sections. One side consists of assets, and the other
side consists of liabilities plus equity.
The sum of each of these two sides must equal each other or be in “balance.” Perhaps, this is another reason why the
statement is referred to as the “balance sheet.”
Here is an interesting balance sheet explanation and example:
http://www.accountingelf.com/how-to-read-a-balance-sheet/
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