Abstract
This chapter focuses on the balance sheet: what it is and what is its purpose; what it does and does not show? A balance sheet is a statement that shows the things of value that an organization owns (the assets), as well as the sources of finance used to buy them. The statement is divided into two parts. The top part of balance sheet provides details of the assets and the bottom part lists the sources of finance. Logically the total of the two parts must be equal, that is the total value of the assets must be equal to the total amount of finance raised to buy them. In other words, the balance sheet must balance. The lower part of the balance sheet shows the total capital invested in the business. The order in which an organization chooses to present its balance sheet items makes no difference to the fundamental information that the balance sheet portrays: the assets that the organization owns and the sources of finance used to purchase these assets.
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