Balance Sheet Accounting
Too often in business the balance sheet is neglected. The balance sheet is one of three important informational statements for your business. It is a report that will show you the value of your company.
The balance sheet has an important function at tax time. Here is a balance sheet review:
The balance sheet assets area tells you and others what your business owns. It includes:
- bank account and monies owed to your business
- inventory owned
- a summary of equipment, furniture, vehicles, and buildings owned
Balance Sheet Liabilities
The balance sheet liabilities area tells about what your business owes. It includes:
- money owed to vendors and other companies
- money owed to the bank and others either line of credit or loans
- money owed for sales tax and payroll taxes
Balance Sheet Equity
The balance sheet equity area tells about what your business is worth. It includes:
- details on what you, the owner, has put into or taken out of the business
- a running total of income earned by the company
- the net income earned in the current year
At year-end the balance sheet serves as proof to the entries for income and expense.
The balance sheet equation is Assets = Liabilities + Equity.
Each area of the balance sheet can be proven with backup papers.
- Bank statements prove checking, savings and loan balances at year-end.
- Unpaid invoices to your customers or bills from your vendors show outstanding monies due.
- Government year-end reporting proves what amounts are still owed in taxes.
This leaves the equity section, which includes net income earned in the current year.
For more information about balance sheet accounting or balance sheets go to our Facebook page and message us, or send an email request to Evyln Carlile at Simple Office Solutions firstname.lastname@example.org.