Meaning And Contents of Balance Sheets

Meaning And Contents of Balance Sheets

Meaning and contents of a balance sheet

Companies' annual accounts fall into two parts. One is a statement showing the results of trading for the year, and is called the profit and loss account. The other is a summary of the total assets of the concern and its total liabilities, and is called the balance sheet. The profit and loss account reveals only the company's performance for one year. From an investor's point of view, however, what is of greater importance is not the performance of a single year, but the entire financial position of the company at a particular date, so that an estimate might be made of the soundness of the concern as an investment. The balance sheet provides this.

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