Chapter 2. The Balance Sheet

One of the two main financial statements of a business…the other is the Income Statement.

 

The Basic Equation of Accounting

• The basic equation of accounting states: “What you have minus what you owe is what you’re worth.”

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• Worth, net worth, equity, owners’ equity and shareholders’ equity all mean the same thing—the value of the enterprise belonging to its owners.

 

The Balance Sheet

• The Balance Sheet presents the basic equation of accounting in a slightly rearranged form:

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• By definition, this equation must always ...

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