Reading Your Balance Sheet Report
- projectdoneangie
- Jan 22, 2012
- 2 min read
The Income Statement (P&L) and the Balance Sheet are your guides to financial well-being. The Income statement shows you your income and expenses so that you can get a sense of what it really costs you to live or run your business.
If you are using a software program to track your finances, you can change the date range to see information for particular time frames – daily, monthly, quarterly, annually.
The Balance Sheet Report shows you the value of all of your Assets and Liabilities or what you own vs. what you owe. Your bank balances are usually listed at the top of the report. Followed by Accounts Receivable (outstanding invoices), Inventory Items as well as any additional assets that you have such as Notes receivable, property assets, Stock, etc.
The second part of the Balance sheet shows your liabilities. This is where you will see your Accounts Payable (bills due), Credit card balances, Loan balances, Mortgage balance, etc.
The bottom of the report shows the Equity or what you have invested with Capital, Distributions, etc.
The Assets equal the Liabilities plus Equity. This is your net worth. If you were to cash out all of your assets and pay off your liabilities (debt), this is what you would have left.
This is a report that you banker is very interested in since it shows if you would qualify for additional credit. If you wanted to sale your business, a future investor would be interested in this report to find out what your business is worth. This is a valuable report for your CPA as well so that they can record any new purchases you might have made during the tax year.
This is a report to watch and build to secure your financial future. If you have more liabilities than assets, this would be the time to make a change. Pay down some of the liabilities and earn more money to buy more assets. You are in control of your financial future when the report shows a well balanced portfolio with liquid assets and long term assets.
I am here to help and answer any questions that you have. You can subscribe to my blog for future information or send me a message on my Facebook page at http://www.Facebook.com/ProjectDone which I will gladly answer. If you feel that you need additional help, you can contact me by email and we can set some time aside to get your numbers to work to your advantage!
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