answersLogoWhite

0

Accounting is based on the formula of Assets = Liabilities + Owner's Equity.

the DR side of a balance sheet are the Assets while the CR side records Liabilities & Owner's Equity. Hence for the formula to be effective, both side of the balance sheet must be equal (balance).

User Avatar

Wiki User

14y ago

What else can I help you with?

Related Questions

Why both side equal of balance sheet?

Both sides of the Balance Sheet equal thanks to double entry accounting. For every debit there is a corresponding credit and vice versa. therefore when you take the balances of all the accounts into a Trial balance they have to balance. A Balance Sheet is derived from the TB so the same holds true.


What is the difference between a balance sheet and a budget variance?

A budget is all expenses of the performances which has done by actual forecasting in front of the income and sources but balance sheet is a sheet that we appear what we have and both sides of balance should be equal and shows the situation of a company but budget shows the estimation of the costs!


How do you know if the numbers on the two sides of the balance are equal?

Before you measure with it you set both sides of the balance equal to zero so then when you measure they will either equal the same or balance out.


Does a transaction always change both sides of a balance sheet How do yo know?

Any transaction that gets reflected on the Balance Sheet will impact both sides of a balance sheet. Balance sheet represents what the company (an entity) owns and owes (to shareholders and debtors). If a transaction results in increase in assets (what it owns), the funding for it will come from investor and equal amount reflect on fund raised. You should not get confused with situation where both the impacts are on the same side which does not results in change of 'size' of balance sheet. For example you sell an asset for and receive cash. Then asset will go down and cash asset will increase. Both the changes are on the asset side. Another example on liabilities side would be raising equity to payback debt. Thus moral of the story is that size of the balance sheet is same on both the sides. So a transaction either changes two sub-accounts on assets side/ liabilities side resulting in no change in the balance sheet size or it will affect both the sides equally resulting in balance sheet remaining 'balanced'


Why the assets and laibilities sides of balance sheet is equal?

Accounting is based on the formula of Assets = Liabilities + Owner's Equity. the DR side of a balance sheet are the Assets while the CR side records Liabilities & Owner's Equity. Hence for the formula to be effective, both side of the balance sheet must be equal (balance). PS: It's not the asset and liabilities side but rather the Debit and Credit side.


The definition to balance?

To make or keep things equal on both sides


Why should the two sides of the trial balance be equal?

Using a trial balance, you can only estimate a weight by having both sides at an equal level and knowing the value of the weights on one side.


What does symmetry balance mean?

Symmetry balance occurs when both sides of a given arrangement are equal. The object is in balance and the same number of items are on each side.


If These children weigh the same Will this seesaw balance?

Yes, if the children weigh the same, the seesaw will balance. The seesaw balances when the weight on both sides is equal.


Do you count weights on both sides when measuring balance?

Yes, weights on both sides are counted when measuring balance.


Is interest on fixed deposit located on income statement or balance sheet?

both.. balance sheet under liquid asset..income statement under inflow/income..


Consolidated balance sheet proforma?

There is no proforma for consolidated balance sheet and both normal as well consolidated balance sheets are same with few differences.