The Balance Sheet
The basic Balance sheet equation isAssets= Liabilities + Owners Equity
This forms the basis for an Accounting report called the Balance Sheet
As you can see the sum of all the Assets on the left is exactly 'balanced' by the sum of the Owner Equity and Liabilities on the right.
The Balance Sheet is just a detailed statement of the Balance Sheet Equation.
A Balance Sheet is a statement of the worth of a business at a particular point in time.
It is important to note that after every transaction the Balance Sheet stays in balance.
This is not an accident.
If one side of the Equation is increased the other side increases to compensate.
Every transaction that occurs has two sides and is processed to the accounts by the rules of Double Entry Bookkeeping.
(Incidentally 'Bookkeeping' is the only English word with 3 consecutive pairs of letters.)
Practice Exercises
You should attempt exercises 1.1, 1.2, 1.3, 1.4 and 1.5.