You may have seen a balance sheet or hear it being discussed. But do you really know what a balance sheet shows you? On today’s entry of Devine Dictionary, we talk about a balance sheet and what it shows you about your business.
A balance sheet is almost like taking a photo. You take a photo to remember a moment in time and a balance sheet shows you how your business looks at a point in time. When you look at your balance sheet it focuses on three main categories, assets, liabilities, and equity. Underneath those main items you will find a break down of individual accounts. From there it is important to make sure that your assets match the liability/equity. If it doesn’t match, then there is something wrong and the problem needs some research.
By now you may be wondering why having an accurate balance sheet is so important to your business. There are lots of reasons why, but one of them is that if your business needs a loan or line of credit a balance sheet is one item that is typically requested. Making sure there are no errors on this report is one step closer to getting you approved.
But more than that it is important to have an accurate balance sheet for yourself as the business owner. It is a great and easy way to get a useful glimpse at your business’s financials. When you use a cloud-based accounting software you can easily pull this any time you need to. Which makes it even easier to understand your business’s financial well-being.
We hope that you found this short explanation about balance sheets helpful. Don’t forget that having a trusted accounting professional is key in ensure that your reports remain up to date and accurate.