ABSTRACT
Baxter felt the balance sheet should give as good a picture as possible of the reporting entity’s assets and liabilities. He identified the reporting entity’s owners as the major user group, and distinguished different needs in terms of expertise. Before considering how the figures can best be presented, it may be helpful to ask how balance sheets got their present form. They almost certainly began as mere trial balances (i.e., as the book-keeper’s private proofs of accuracy). Much ingenuity has been expended on explaining to students why capital is like a liability; a rather more truthful plan is to say that it is nothing of the kind (in the owner’s eyes, at least), and that its appearance on one side of a balance sheet is just a quaint survival of early practice. Even the best drafted of balance sheets, considered all by itself, cannot tell us much about a firm’s progress.
