The Balance Sheet

by Rusi
(Janakpur, Nepal)

The Balance Sheet

The Balance Sheet

Why do liabilities equal to total assets on the balance sheet?

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Dec 08, 2017
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by: Stephanie

Thank you for your question about why do liabilities and owners equity equal to total assets on the balance sheet. The balance sheet equation of assets = liabilities + owner's equity is the foundation of double entry accounting.

It represents the relationship between all business transactions and basically shows that what is owned (assets) is purchased by either what it owes (liabilities) or by what it's owner's have invested (equity or capital).

This relationship is expressed in the form of the balance sheet equation and it must always remain mathematically in balance.

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