Imagine a report listing everything your company owns. This fairly common and often-required report is called a balance sheet. To draft a balance sheet, you just need to know your three balance sheet accounts: assets, liabilities and equity. These three balance sheet accounts report what your company owns, what your company owes, and what your company is worth if you close your doors.
Assets and Liabilities on Your Balance Sheet Account
Assets, which show up on balance sheet accounts that explain what you own, include items that easy to trade such as cash or inventory. They also include your more expensive, heavier equipment including your company car, as well as real estate such as your office building. Your total assets consist of everything you own.
You’ve paid for all those assets by means of debt or equity. For example, when you bought your company car (an asset), you may have paid cash out of your own pocket (equity) or taken out a loan (a liability). Total assets always equal the sum of total liabilities and total equity. That means that balance sheet accounts have a set relationship that can never change.
Your balance sheet accounts spell out how risky your company is. If your balance sheet accounts show high amounts of debt, it might be harder to secure bank loans, attract private investors, or stay on top of interest expenses.
If the thought of coming up with your balance sheet accounts is intimidating, don’t worry. Balance sheets are an integral part of financial software packages, so rely on the financial reporting available at your fingertips. 4.3 million customers use QuickBooks. Join them today to help your business thrive for free.