What Is A Balance Sheet?
Photo by Jess Bailey Designs from Pexels
A balance sheets provides all your liabilities long and short term, assets, and bank balance. Your bank account balance should match your balance sheet every month. If it doesn’t something is wrong or maybe added in the wrong place. You should always provide your bookkeeper anything such as buying a car for the business, loans, or anything financing done under business so it can be included in your financial reports. It depends on which entity you have chosen whether you have to have payroll or not. S-corp require payroll and you have to make a certain amount to become an S-corp. It helps with your taxes.
This is an example of a balance sheet.
Definitions
Current Assets- These are your bank and credit card accounts in your transactions go through on a daily basis and sometimes they are called your current accounts.
Other Current Assets – These are funds that has not been deposited in the bank and the uncategorized assets are transactions that have not been categorized to categories such as office supplies or car and truck categories.
Liabilities – Liabilities are loans, mortgages, or warranties.
Current Liabilities – Current Liabilities are for example credit cards that have open balances, payroll taxes, sales, federal taxes that you have to pay monthly.
Equity – This is income that the business has made such as
retained earnings which is money that has not been used
owner’s investment is when the owner invests in the business by depositing money.
Owner’s pay and personal expenses is when the owner pay themselves or make personal transactions.
It is important that your balance sheet matches your bank statements and credit card statements every month. If this does not happen then something is wrong. This report is totally different from the profit and loss report. These are two important reports that you should run every month to see when your business stands to make great financial decisions. The Profit and Loss report is often running more than the balance sheet but in my private practice I provide both to my clients so they can see both side of the financial statements which is all the profits, expenses, and net income from the profit and loss report and all the current balances in their accounts and liabilities they have in the business. I suggest you make sure your transactions and reports are correct monthly so you can provide them to a loan officer if you need to money for your business.