Balance Sheet
Although the balance sheet was first implemented just a couple of centuries ago,
it has quickly developed and sophisticated to become nowadays a widely used and
powerful tool in the hands of professional users, well known and popular even
among the mass public. In spite of its prominence, or may be because of it, the
balance sheet can not be easily and fully described in a few words, but still,
if we leave aside its various functions and forms and any other subjective
factors, we can state that the balance sheet is a summary of an enterprises\'
assets, liabilities and equity at a specific moment of time. To simplify this
description even further we could say that the balance sheet shows an entity\'s
possessions, obligations and others\' debts to it. The "objective"
point of view however is often too restrictive, and the most simple things many
times prove to be rather complex... Among the thousand more complex definitions
appended to the balance sheet one of my favorites is the definition given by
.... according to which the balance sheet is a statement meant to communicate
information about the financial position of an enterprise at a particular point
in time, summarizing the information contained in accounting records in a clear
and intelligible form, giving information about the financial state of an
enterprise and indicating the relative liquidity of the assets, showing the
liabilities of the enterprise (i.e. what the enterprise owes and when these
amounts will fall due), able to assist the user in evaluating the financial
position of the enterprise, being however only part of the data needed by users.

Or to summarize this long description with which I completely agree, I could say
that although the balance sheet is one of the most outstanding instruments in
the hands of financial analysts, managers, investors and other users, its
importance should not be over emphasized, it has to be viewed along with many
other documents, and it is far from being the perfect and the "super"
financial document. In order to get a more clear, complete and fair picture of
the balance sheet, apart from reviewing the definitions given by the experts in
this field, we would need to consider as many sides and issues of the subject as
possible. Being objective we should have a look at the etymology of the word
"balance", the history of this document, its theoretical essence and
the basic concepts of accounting implied in it, its forms in the accounting
practise. In our attempt however not to become "over-objective" or
scholastic, we should also review the aims and purposes of the balance sheet and
the extent to which they are fulfilled, the users of this financial statement
and their contradictory needs, the negative aspects and restrictions of the
balance sheet, and finally the trends of its further development. In short, we
have to go further into the matter... The history of the so called financial
statements, and the balance sheet among them, can be traced back to Renaissance

Italy, where along with the double - entry book - keeping they first evoked to
respond to the growing more and more complex needs of the accounting connected
with the economic development of the society at that period (expansion of trade
activities, development of banking, etc.) and with the transition from the owner
- manager model towards limited companies or the breakdown of ownership from
control. Obviously these historical events called for the development of new
methods and new documents, reflecting the changes. Naturally the word
"balance" itself has also an Italian origin ("bilan", "bilanz")
though it is formed up of two latin words: "bi" - double and "lanx"
- scales. Even from here it becomes obvious that the balance sheet is a sheet or
summary of two different aspects of one and the same thing: an entity\'s
financial position. Further to this aspect, we can take a look at the definition
of the balance sheet given by John Arnold, Tony Hope and Alan Southworth:
"The balance sheet is the most inituitive and easily understood document of
accounting. Most of us at some stage in our lives will be required to compute a
listing of our possessions. Such a listing of possessions is a major element in
the construction of a balance sheet.". Far from being a precise statement
on what the balance sheet is, it can easily be perceived from a phylosofical and
psychological view point, and then, though defined at present times, it can be
related with the historical side of the balance sheet. The link is as simple as
that: one would generally describe