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

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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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Solution Summary

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

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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 ...

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