Accurate record keeping contributes to your business’s success more than most entrepreneurs realize. It’s important to keep an accurate balance sheet, sometimes called a statement of financial position, to ensure your Carrboro business’s assets and liabilities are accounted for. The balance sheet, part of a company’s larger financial report, collects the company’s assets, liabilities and owner’s equity to determine liquidity and net worth at that time.
There are three figures on the balance sheet: the company’s assets, liabilities, and equity. To track these figures, it is necessary to be accurate and cautious when record keeping, especially on the balance sheet.
Assets refer to anything owned by the company that can be used to meet debts or commitments.
Assets fall into two categories:
Liquid – cash and/or items that can be easily sold and converted to cash
Non-liquid – assets not easily converted into cash, like property
*intangible assets may be included in the asset log, but since they are not easily valued, it’s best to speak with an experienced accountant for clarification on what is best for your Carrboro business.
Liabilities are debts or obligations owed to creditors, stockholders, etc.
Categories of liabilities:
Current – payable within one year
Long Term – debts payable over a period longer than one year
A business’s equity is determined by deducting its liabilities from its assets. Calculating the equity will give you a clear picture of the value of the business and allow you to see your profit margin. Ideally, your revenue will exceed your expenses.
Balance sheets are the best way to keep track of financial records. They help a business and its creditors understand the business’s financial position at any point of time and determines a company’s ability to repay any debts.
Anyone with a financial stake in the company has the right to review the balance sheet. Your banker, lenders, and investors may request access to your business’s financial records at any time to determine the risk of supporting your Carrboro business.
Other people that may wish to review your balance sheet include:
At C.E. Thorn, CPA, PLLC, we have nearly 30 years of experience providing small business support for entrepreneurs in Carrboro. Our team of accountants understand the ins and outs of managing small business finances. To speak with an experienced small business accountant in Carrboro, by call us at 919-420-0092 or completing the online contact form today.