Why Assets And Liabilities & Equity Are Equal In Balance Sheet

 

Because all assets acquired by the business through external liabilities and internal liabilities (Owner’s Equity or Equity), according to Accounting Equation. Also due to dual aspect accounting concept of business transactions, the total of debits must be equal to the total of credits in a transaction under Double Entry Bookkeeping System.

The Dual Aspect Accounting Concept stated that:

   “For Every Debit, There Must Be A Credit With An Equal Amount”

If the debit side and credit side of an account are not equalized or balanced with each other, then accurate accounting information can not be obtained.

So, Balancing of Accounts or Equalization of Accounts is necessary so that balance sheet, which is also a representation of an Accounting Equation, should be tally on specified time of a particular date during the accounting period.