Balance sheet is a method that allows you to generalize and group the assets of an economic entity and the sources of their formation at a certain date. The balance helps to determine: what are the assets of the enterprise that it can have at the moment, what sources were their basis, for what purposes they are intended and spent. All this information is reflected in the balance sheet.
Balance sheet data is used not only for the financial and accounting statements of the enterprise. This document is a source of valuable information and parameters for the correct management of financial flows and the very structures of its assets and liabilities. Today, without the data in the balance sheet, it is impossible for the management of the enterprise, which, on the basis of accurate financial and accounting information, develops a strategy for the development and life of the enterprise. Knowledge of the balance sheet is indispensable for financiers, those who are engaged in investment programs, control, lending, etc. Balance reading is now an indispensable skill for senior managers who make important management decisions.
To keep the scales accurate
The word "balance" itself is translated from French as "scales", which determines the purpose and function of this financial document. Graphically and structurally, it is a statement represented by a two-sided table. Its left part displays what assets are available, what sources formed them. It also contains information about the property of the enterprise, which are grouped by type. All this data is called the balance sheet asset. The balance sheet liability is reflected in the right side of such a statement, it contains information about the sources that were the basis for the formation of this property. Drawing up and maintaining a balance sheet assumes that the sum of its right and left sides should always be equal. That is, there must be an equal sign between the asset and the liability.
An asset is always equal to a liability
The very concept of assets includes resources controlled by an enterprise based on past events. The use of these resources is expected to provide economic benefits in the future. For example, in order to be listed as an asset, the resources must be controlled by the enterprise (one of the options is that it must own it as property). And property brings some benefit in the future.
Liabilities represent the sources from which the assets originate. According to the amount and structure of liabilities, it is determined whether the company received its assets using equity, or whether the liabilities were formed due to the fact that the company had any liabilities.
The total amount of the asset (or liability) is called the balance sheet currency. Sometimes this term is replaced with a balance number.
