When you get into business, even if it is a home based one, there are lots of things to learn! As you go along, you will learn terms that you thought were Greek to you! Yes, being in business is a learning curve…
Heard about Balance Sheets? Always wondered what those were? We bring you some pointers and eye-openers on the matter, to arm yourself with awareness!
- A Balance Sheet is a statement of accounts that mirrors the exact financial health of your business / company.
- It shows the assets of the company
- It also reflects the liabilities of a company / business.
- The Balance sheet is necessary, in order to find out what the owner’s equity is in the business.
- Every business maintains accounts. A detailed version of the same is called a Balance Sheet.
- Assets are always shown on the left of the balance sheet.
- Liabilities are always shown on the right side of the balance sheet.
What are Assets?
A company’s assets can be divided into Fixed or Current Assets. An asset is a resource which the company can benefit from in the future. These may include machines, stock, cash, investments, property and even goodwill
What are Liabilities?
The economic obligations of a business are called Liabilities. These are measured through accounting principles, and can be short term or long term liabilities. These may include loans, deposits from investors, inventory, raw material, trade liabilities etc.
Why do I need a Balance Sheet?- It is a snapshot of the company’s finances and financial health, at a given date.
- It helps the owner of a small business to get acquainted with the strength and capabilities of the business.
- This can be very useful in initiating some valid decisions eg. Should one expand? Should one cut down the overheads?
- A Balance Sheet can help identify and analyze trends.
- If you were to apply for a bank loan, this is the first and the most important document, your bankers will ask for!
However small a business, you will certainly benefit from keeping your hand on the pulse, by maintaining a Balance Sheet. You will need a qualified person to prepare a Balance Sheet for your business / company, but make sure you spend some time in understanding it!
Balancing Act!! 
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