No business owner should ever underestimate the importance of a balance sheet. A balance sheet can reveal a lot about your business and in turn, its overall health. As a business owner you will want a good accounting service that can help provide a sound balance sheet. By understanding how to read your balance sheet, you as a business owner, will know how to make the right decisions to ensure the ultimate success of your business. Mark Dicus & Company will share the importance of a balance sheet and how to read it.
What is a Balance Sheet Used For?
Accounting services are providing your business a lot of instruction simply on balance sheets alone. One of the key formulas of a balance sheet is based on assets = liabilities + owner’s equity. The key to this formula is breaking down each of the terms and what they mean to you as a business owner. For example:
• Assets: The company owned resources or products/inventory of value.
• Liabilities: The company’s financial obligations.
• Owner’s Equity: The owner or their shareholder’s cumulative equity.
What are Assets & Liabilities on a Balance Sheet?
Assets and the liabilities are divided into either a short-term, long-term, or non-current category. These categories include liquid accounts, which includes cash, as well as inventory, and accounts payable short-term. Fixed assets, property, factory, equipment, and debts that are over one-year are categorized as non-current. Assets greater than the business’s overall liabilities will show a balance sheet with a positive net worth. However, when the assets are less than the liabilities, the balance sheet will show a negative net worth. With a proper balance sheet you will be able to see if your company is making money or if it is losing money.
What Does a Balance Sheet Tell You?
A balance sheet that is properly done makes it very easy for a business owner to look over the amount of money that is being made by the business. With a balance sheet, you can see if the business is profiting or if it is losing money each month. When a business is losing money, changes will be needed to ensure the success of the business. Some business owners will depend on financial statements to oversee the health of the business. However, this is a major mistake. The financial statements only show the transactions that have already occurred and never projects outward. A balance sheet will provide a bigger picture and will lay out not just current profit but current debts. A balance sheet will show everything which brings total financial awareness. With a proper awareness of your business and its financial health, you will know how to make better decisions such as investments, offers, and changes you may need to make within the company.
Bookkeepers, Accountants & More in Summerlin, North LV, Henderson, Lone Mountain Village & Greater Las Vegas, Nevada
When you are running a business it is important to have a knowledgeable accounting service that can provide competent balance sheets. It is also equally important that a business can analyze the balance sheet to understand the health of the company. If a business owner needs help understanding balance sheets or needs a quality bookkeeping and accounting services, contact Mark Dicus Company LLC.