Balance plays an important role in nature and economics. Understanding balance helps comprehend the language of finance and accounting, to which I will refer later.

Nature

This list provides examples of things which always occur together (or in balance) in nature.

• Convex - Concave
• Compression - Extension
• Proton - Neutron
• Source - Use

In addition to always occurring together in nature, sources and uses of goods always occur together in economics. Every good must have a source and, simultaneously, it must have a use (or vice versa), even if the use consists of leaving it in place for future use.

People frequently forget—or ignore—this balance when discussing economic issues. When a person, organization, or government uses economic resources, those resources must come from some source.

When politicians speak of using spending to stimulate the economy, you cannot know the effect of that "stimulative spending" until you know the source of the money (or resources) spent.

Finance & Accounting

The language of finance and accounting communicates the balance of sources and uses.

Credits record sources (Source = Credit)

To record selling an asset or borrowing a resource we enter a credit in the appropriate account. The sale of an asset or the increased indebtedness represent sources of funds.

Debits record uses (Use = Debit )

To record purchasing an asset or repaying a resource we enter a debit in the appropriate account. The asset purchase or the reduced indebtedness represent uses of funds.

 

With these few background points in mind let's look at your hypothetical economic situation represented by a list of assets and liabilities.