Use a Balance Sheet to Evaluate the Health of Your Business
Source: Entrepreneur | Repost QBScott 2/9/2022 –
One of the tools that can be used to assess the performance of your business or organization is a balance sheet. A balance sheet, which should be a part of the financial model in your business plan, categorizes your assets (everything you own), your liabilities (everything you owe) and your equity (the financial contributions made by all owners in the business). The cardinal rule for a balance sheet is that your total assets should equal the sum of your total liabilities and total equity (i.e., assets = liabilities + equity). If this equation isn’t true, then it’s because of an accounting error, not because your business is performing badly.
Balance sheets can be difficult to understand since a change in your assets almost always involves a change in either your liabilities or equity (or vice versa) in order for the equation above to remain true. While it would take more than an article to explain all of the intricacies involved in balancing a balance sheet, the following information will help you know what should be factored into your balance sheet and where.
Author: Scott Meister, CPA
I help small businesses, accountants, bookkeepers, office managers, and business owners with their accounting needs. I’ve used QuickBooks since 2002 and train folks on how to use it efficiently. I create high-quality video training tutorials for QuickBooks and post them on QBScott.com.
Certifications include: Certified Public Accountant (CPA) | Certified Bookkeeper (CB) | Advanced Certified ProAdvisor for QuickBooks Desktop | Advanced Certified ProAdvisor for QuickBooks Online | Certified ProAdvisor for QuickBooks Enterprise | Certified ProAdvisor for QuickBooks Point Of Sale