Balance Sheet: A key tool in assessing the financial health of a business

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Balance Sheet (Balance Sheet) What is it and why is it called that?

Balance Sheet is a primary accounting document used by management, investors, and business owners to understand the financial position at a specific point in time. The name “Balance Sheet” comes from a fundamental principle: the left side (Assets) must always equal the right side (Liabilities + Owner’s Equity), hence the term “balance.”

Currently, international accounting standards have renamed it to Statement of Financial Position (Statement of Financial Position) to better reflect its purpose — not just balancing numbers but providing a comprehensive view of the company’s assets and sources of funding.

Main Equation: The Foundation of the Balance Sheet

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