The balance sheet is usually prepared at the end of a financial year when the accountant produces financial statements to calculate income tax.
The accountant will ensure the financial reports are in agreement with generally accepted accounting practices (GAAP) and with tax legislation and will make the necessary adjustments to do so.
The accountant will pass on these adjustments (known as end of year alignment journals) to the bookkeeper to update the bookkeeping system. This ensures the information in the bookkeeping system continues on accurately from year to year as the business goes on with trading activities which affect the assets, liabilities and equity.
Large businesses and corporations tend to naturally have more complicated balance sheets whereas small businesses have simple, less complicated ones.
The balance sheet for either can be as detailed or as summarised as the business requires. It could simply show a total for each heading (assets, liabilities and equity), or it can show a listing of each item that makes up the headings.
Another name for an accounting balance sheet is the statement of financial position.
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