Chapter 5
Reporting Financial Condition
In This Chapter
Reporting financial condition in the balance sheet
Reading the balance sheet
Categorizing business transactions
Connecting revenue and expenses with their assets and liabilities
Examining where businesses go for capital
Understanding balance sheet values
This chapter explores one of the three primary financial statements reported by businesses — the balance sheet, which is also called the statement of financial condition and the statement of financial position. This financial statement is a summary at a point in time of the assets of a business on the one hand, and the liabilities and owners’ equity sources of the business on the other hand. It’s a two-sided financial statement, which is condensed in the accounting equation:
Assets = Liabilities + Owners’ equity
The balance sheet may seem to stand alone — like an island to itself ...
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