Why is it called a balanced sheet ?

By Ivory Crypt | Finance and Crypto | 4 Jun 2020

  • Because both sides have to be balanced. You would understand in a few minutes...

Note the following terms:

  • Assets - the stuff you own 
  • Liabilities - a bank that owns your stuff
  • Equity - people that own your stuff 

Assets = Liability + Equity



A balance sheet is a snapshot in time, it tells you what you own and what you owe at this moment.

  • Assets  
    • Current Assets
      • This category has stuff that can be transmuted to cash in a short time period which is typically done in less than 1 year. Here are a few examples:
        • Cash and equivalents  
        • Short term investments - T-bills 
        • Accounts receivables - money owed to us by customers, usually short term  
        • Inventory  
    • Long Term Assets
      • This category has stuff that can be transmuted to cash typically in a longer period of time. This category shows how much the assets are valued at today. That means, we would have depreciated the assets before showing them in today's balance sheet. Here are a few examples:
        • Buildings  
        • Land  
        • Machines 


  • Liabilities and Equity (These two are usually grouped because Liabilities plus Equity should always equal Assets)
    • Liabilities
      • Current Liabilities  
        • Accounts payable  -  this simply means money we owe to other people.
        • Short term debt  -  debts that are due in less than one year  
      • Long Term Liabilities  
        • Debts you typically have to repay over a couple of years.
    • Equity 
      • Retained Earnings  -  assuming we do not pay out our earnings in dividends and we retain it in the company, it would be under this category. This is the link between the income statement and the balance sheet. It is usually the net income from last year's income statement.
      • Common Share  -  the issuance of common shares.





How do you rate this article?


Ivory Crypt
Ivory Crypt

Finance and Crypto

Finance and Crypto
Finance and Crypto

Comprehending Finance and Market Patterns.

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.