In order to understand your Zebulon business’s financial state and future outlook, using a balance sheet is essential. The balance sheet is one of the more commonly used financial statements that accountants, banks, and business owners use to get a snapshot at the financial health of a business during a set time frame. This is also known as a statement of financial position.
All balance sheets have three main components: liabilities, equity, and assets.
Assets are what your business owns, including items you’ve purchased, like inventory and equipment, along with resources you’ve paid for in advance that haven’t run out. This includes rent that is paid up through the month or a pre-paid insurance policy.
Assets can be divided up into liquid – cash or items that can easily be sold for cash, and non-liquid assets – things that can’t be converted into cash like property or pre-paid insurance.
Every business has operating costs and payments to make. Most liabilities are categorized as either current, meaning you have to pay them within a year, and long term, meaning you can pay them off outside of one year.
Equity is how much is left after subtracting your liabilities from your assets. Your equity tells you your business’s value. A higher equity generally means a healthier business.
Not only do you need a clear, up-to-date look at your Zebulon business’s value so you can make future decisions related to inventory, paying off debt, growth, and hiring, your balance sheet is also used for documentation.
For example, if you want to a loan to expand your business, banks or creditors will need to see your recent balance sheet to ensure you are a good investment. Additionally, banks, investors, government agencies, and financial officers in your business may want to analyze your balance sheet if they have a stake in your business.
At C.E. Thorn, CPA, PLLC, we provide numerous accounting services for small businesses in Zebulon. Let us help you create an accurate, up-to-date balance sheet so you’ll know more about your business and can plan for the future. Learn more about our services and how we can help you when you call us at 919-420-0092 or complete our online contact form to schedule a consultation.