Question

What exactly does the word balance mean in the title of the balance​ sheet? Why do we balance the two​ halves?  ​(Select all the answers that​apply.)

A.

The total value of all of the​ firm's assets should equal the sum of its​ short- and​ long-term debt plus​ stockholder's equity.

B.

In order for the balance sheet to​ balance, stockholder's equity must exclude preferred​ stock, common stock at par​ value, paid in capital in excess of par on common stock and retained earnings from previous profitable years in which some of the earnings were held back and not paid out as dividends.

C.

When the balance sheet does not​ balance, the difference must be reported as an​ "off-balance sheet" account for the two halves to balance.

D.

The balance sheet balances the​ firm's assets against its​ financing, which can be either debt or equity.

Answer 1

A.The total value of all of the firm's assets should equal the sum of its short and long term debt plus stockholder's equity.

D.The balance sheet balances the firm's assets against its financing, which can be either debt or equity.

Balance sheet usually shows the financial position at any given point of time.

Stockholder's equity must included preferred stock, commonstock at par value, paid in capital in excess of par on commn stock and retained earnings, (so B is incorrect).