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How is a balance sheet adjusted so that both sides 'balance'

What part of the balance sheet is adjusted to make sure that the right and left sides perfectly balance, and what does this component represent?

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Remember the formula: Assets = Liabilities + Equity.

Since we don't change assets or liabilities to force a balance, equity is the place where the change will occur. It will come from the income statement which becomes part of equity at year end.

Remember the closing entries ...

Solution Summary

The solution the balancing process together with two examples to easier understanding.

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