The balance sheet is the foundation of the double-entry system. This works with real accounts - that means that you record the current financial state of your company according to various plans, at both the beginning and the end of each fiscal year. These can later be merged and compared with one another. This way, you can keep track of where, when, and what you spend your money on, as well as where your money comes from.
1. Basics: The division of assets and liabilities
The balance is divided into assets and liabilities. The assets describe all business transactions that comprise what you spend your money on, e.g., for fixed assets (technical equipment, machinery, etc.), inventories (raw materials and supplies), securities, etc. The liabilities, on the other hand, have to do with all transactions concerning the origin of your assets, i.e., where your money comes from - such as from capital, loans, profits, etc. The comparison helps you keep track of the areas in which your money is spent and gained.
A detailed overview of the individual asset utilization and revenue can be found in the following graph (Table 1):