The Balance Sheet Essay

3047 Words13 Pages
The Balance Sheet

Although the balance sheet was first implemented just a couple of centuries ago, it has quckly developed and sophisticated to become nowadays a widely used and powerful tool in the hands of professional users, well known and popular even among the mass public.

In spite of its prominence, or may be because of it, the balance sheet can not be easily and fully described in a few words, but still, if we leave aside its various functions and forms and any other subjective factors, we can state that the balance sheet is a summary of an enterprises' assets, liabilities and equity at a specific moment of time. To simplify this description even further we could say that the balance sheet shows an entity's
…show more content…
In our attempt however not to become "over-objective" or scholastic, we should also review the aims and purposes of the balance sheet and the extent to which they are fulfilled, the users of this financial statement and their contradictory needs, the negative aspects and restrictions of the balance sheet, and finally the trends of its further development. In short, we have to go further into the matter...

The history of the so called financial statements, and the balance sheet among them, can be traced back to Renaissance Italy, where along with the double - entry book - keeping they first evoked to respond to the growing more and more complex needs of the accounting connected with the economic development of the society at that period (expansion of trade activities, development of banking, etc.) and with the transition from the owner - manager model towards limited companies or the breakdown of ownership from control. Obviously these historical events called for the development of new methods and new documents, reflecting the changes.

Naturally the word "balance" itself has also an Italian origin ("bilan", "bilanz") though it is formed up of two latin words: "bi" - double and "lanx" - scales. Even from here it becomes obvious that the balance sheet is a sheet or summary of two different aspects of one and the same thing: an entity's financial position.

Further to this aspect, we can take a look at the definition

More about The Balance Sheet Essay

Open Document