I did accounting more than ten years ago in high school, but can’t remember it understand why if for example assets increase, the other side of the balance sheet also increases?
In: Economics
Because you can’t print or destroy money. If you’re assets increased, you must have paid for those assets somehow – so you have less cash or more debt or whatever it took to get that asset.
The accounting equation is Assets = Liabilities + Equity.
As you increase or decrease one side of the equation, the other side is also increased or decreased. So if I report taking out a 500 dollar loan as an increase in my assets, I’m also recording it as an increase of 500 dollars of liability, balancing both sides of this equation . It is therefore balanced by design.
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