Accounts Demystified, 7th Edition

1

The balance sheet and the fundamental principle

• Assets, liabilities and balance sheets
• Sarah’s ‘personal’ balance sheet
• The balance sheet of a company
• The balance sheet chart
• Summary

What I’m going to do first is explain what assets and liabilities are, which may seem trivial but it’s important there are no misunderstandings. Next, I will explain what a balance sheet is and show you how to draw up your own personal balance sheet. We will then relate this to a company’s balance sheet.

At that point, I will, finally, explain what I mean by the fundamental principle of accounting and you will see that the balance sheet is just the principle put into practice. I will also show you how we can represent the balance sheet in chart form, which I ...