The balance sheet provides a snapshot of the firm’s financial position at a given point in time. The balance sheet identity is a fundamental accounting equation that underpins the balance sheet. The identity is represented by the following equation:This means that the assets (what a company owns) are funded by either liabilities (what a company owes to others) or by equity (what is owned by the shareholders).This equation must always balance, and for this reason, the statement is called a balance sheet.
Learn Balance Sheet Identity with interactive examples and practice exercises in our Balance Sheet module.
This interactive learning module helps you understand Balance Sheet Identity through hands-on practice and real-world examples.