ContentsIncomplete DataTangible assetsDouble Entry Accounting SystemBusiness assetsWhy is a balance sheet important? If a company keeps accurate records, the accounting equation will always be “in balance,” meaning the left side should always equal the right side. The balance is maintained because every business transactionaffects at least two of a company’s accounts. For example, when a company borrows money from a bank, the company’s assets will increase and its liabilities will increase by the same amount. When a company purchases inventory for cash, one asset will increase and one asset will decrease. Because there are two or more accounts affected by every transaction, the accounting system is referred to as double entry accounting. It’s also helpful on a lower level by keeping all transactions in balance, with a verifiable relationship between each expense and its source of financing. The accounting equation ensures that all uses of capital remain equal to all sources of...
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