Balance Sheet Identity

Posted in Finance, Accounting and Economics Terms, Total Reads: 3315

Definition: Balance Sheet Identity

Balance sheet identity is an elementary equation which forms the basis for financial reporting and also becomes a reason for the accounting for each entry in two accounts.

The balance sheet identity states that the total amount of uses of funds is equal to the total amount of sources of funds which can be expressed as:

Assets = Liabilities + Owner's Equity

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