Why Balance Sheet Always Balance ?

Simplest answer to this would be the double entry system.

What is a Double entry system ??

We know a balance sheet contents two columns, one side sources of funds (asset+ liability ) and other side application of funds (assets).

Here comes the catch, when money comes in or goes out from company you need to entry in the both side (sources side and application side).

Suppose you borrow Rs:500. Then you need to show Rs:500 as borrowings in source side and Rs:500 as cash or bank balance in application of funds/ asset side.

Let's take an example, Suppose you are starting up your own business.

Day 1 : You put your own Rs:1000 i.e money comes in. 

Day 2 : You borrowed Rs:1000 from bank i.e money comes in.

Day 3 : You bought machinery of Rs:700 i.e money goes out.

Day 4 : You bought raw material of 1500. Wait wait .. How can I do that, i have only 1300 cash in hand.

Actually you bought on Rs:200 credit from suppier i.e Rs:1300 goes out from asset side and Rs:200 comes in as supplier credit(accounts payable).