The term "balance sheet" is the sole reminder in modern accountancy of what in former days was regarded as an essential function, viz., that of "balancing" the accounts. At the end of a fiscal period all the accounts remaining on the ledger, after closing the profit and loss account, were entered in the balancing account, and from it were opened all the accounts for the succeeding period. In other words, all accounts went in on one side and came out on the other unaltered by a dot.

Of this practice only the name survives. It is mentioned here to remind the reader that the word "balance" has two entirely distinct meanings in the expressions "balance sheet" and "trial balance," and to indicate the cause for that distinction.

As we have seen, the trial balance is a list of ledger balances. The balance sheet is a statement of the accounts formerly passed through the balancing account. In practice today, however, the balance sheet is not, strictly speaking, a list of balances, but a statement compiled after all the nominal accounts have been brought together in a profit and loss account, or revenue account, and after all inventories have been taken. The accounts still remaining on the ledger show the "unfinished business" of the concern. These balances are then put in the form of a statement of assets and liabilities at a given moment, together with such reserve, surplus, or profit and loss accounts as bring the two sides of the statement to an equality.