why the both side total is equal of balance sheet
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Take a plywood place two bowls at the end with of same mass and observe it, the plywood sheet is equal balanced.Because,at the end of sheet two bowls is of equal mass.
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It is because of DOUBLE ENTRY SYSTEM that we follow. For every debit, there will be a corresponding and equal credit.
For Example,If u buy a machine costing 1 Lakh on credit,
1 lakh worth Machine becomes your asset and 1 lakh of amount becomes your outstanding liability.
So, on the Assets side, you will have machine with 1 lakh in the amount column and on liabilities side, outstanding liability of 1lakh in the amount column.
Take every transaction in your business ,this debit and credit gets balanced. Hence, the Balance sheet tallies.
For Example,If u buy a machine costing 1 Lakh on credit,
1 lakh worth Machine becomes your asset and 1 lakh of amount becomes your outstanding liability.
So, on the Assets side, you will have machine with 1 lakh in the amount column and on liabilities side, outstanding liability of 1lakh in the amount column.
Take every transaction in your business ,this debit and credit gets balanced. Hence, the Balance sheet tallies.
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