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A Balance Sheet is a detailedexpression of the accountingequation for a business at a certainpoint in time. It is a major reportthat lists the various asset, liabilityand owner’s equity items.
• usually presented in the form of the accounting equation A – L = OE• prepared after Income Statement – net profit/loss is included in the Owner’s Equity section
• assets are listed in order of liquidity – those assets most easily converted into cash are listed first• liabilities are listed in the order they would be repaid – those repaid quickest are listed first down to those taking longer to repay last
• all accounts provided in the sheet are listed with their final balances except for the capital a/c• the capital a/c lists the balance at the beginning of the period and indicates net profit and drawings for the period resulting in the closing capital balance