Why do they call it a “Balance Sheet”? Because the two sides, Assets on the left (top) and Liabilities and Owners Equity (on the bottom or right) equal each other.
Assets = Liabilities + Owners Equity
Let’s say PDQ Services has $200,000 in assets, which includes cash, receivables, vehicles, equipment and inventory. And let’s say they have $80,000 in liabilities, which include payables and loans outstanding. Their Equity is $120,000.
Assets of $200,000 = Liabilities of $80,000 + Equity of $120,000.
Another way to express it is Assets – Liabilities = Owners Equity.
More tomorrow!
Hi Larry 🙂