A balance sheet is a financial accounting document used to state a company’s current assets, liabilities, and equity.
A balance sheet is a financial accounting document used to state a company’s current assets, liabilities, and equity.
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A balance sheet is a financial accounting document used to state a company’s current assets, liabilities, and equity. A business should have a balance sheet available in order to show potential investors and shareholders the current financial state of their company. Balance sheets should be updated regularly to reflect the current financial state of the business.
There are two sides to the balance sheet: one will have assets, and one will have liabilities. These two sides should even out for a business to be successful. Each account should be listed separately. The company only needs to list their current assets and liabilities for the particular time period.
Balance sheets will vary depending on the type of business. Accountants are typically best suited to complete and present an accurate balance sheet.
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If you're a small business owner, you'll need to learn how to throw a balance sheet together. Good news - creating one is not difficult. Essentially, balance sheets allow you and your shareholders to assess your business' financial status . This article gives you everything you need to draw up a balance sheet template, which you can then fill in with the pertinent information. A balance sheet form consists of three major components.
Assets
This section includes anything that generates revenue for your business, such as real estate, cash, equipment, and inventory. You should list your assets in two categories - current assets and non-current assets. These are pretty self-explanatory - current assets are assets you expect to use within a year (12 months), such as inventory that you regularly restock . All longer-term assets, such as equipment, company cars and real estate, fall under the umbrella of non-current assets.
Liabilities
Much the way assets illustrate financial influx, liabilities reflect outflow and debts your business accrues. Be sure to list both liabilities that are current (relevant within 12 months) and non-current. Current assets generally include short-term loans, purchases and accounts payable, whereas non-current assets are things like long-term loans and mortgages.
Owner's Equity
This final section of your balance sheet reflects the difference between your business' liabilities and assets - in short, what you end up with at the end of the day. It is also known as capital, member's funds or shareholder's equity. When calculating your equity, be sure to factor in assets you yourself have contributed to the business (" capital ",) as well as reinvested profits (known as "retained earnings" or "accumulated losses") and profits set aside for business maintenance, (emergency funds, etc).
