The Balance Sheet
A balance sheet is a statement of what the company owns and what it owes at a fixed point in time. It remains important to look at changes occurring from month to month because there is a direct relationship between changes in your balance sheet and your cash flow.
The Year at a Glance Balance Sheet allows you to track balance sheet accounts for trends. It also allows you a measurement system to track goals you may have to decrease inventory, or decrease accounts receivable (both of which would increase your cash).
The most important accounts to focus on are cash, accounts receivable, inventory, fixed assets and accounts payable. If accounts receivable go up—your cash goes down
• If inventory goes down—your cash goes up
• If accounts payable goes down—your cash goes down
• If fixed assets go up—your cash goes down.
ASSETS
Current Assets
Cash
Accounts Receivable—money owed to you by your customers
Inventory—your product waiting to be sold, either at your location or at a store
Prepaid Expenses—items such as insurance or taxes (example: an insurance premium is paid up front for a whole year; this entry spreads it out over the policy period)
Other Current Assets—miscellaneous items like rent deposits
Fixed Assets—real property, equipment and leasehold improvements
Accumulated Depreciation
Net Fixed Assets
Intangible Assets—good will, intellectual property—rights to something, trademarks, patents
LIABILITIES
Current Liabilities—an amount you owe to someone else, generally to be paid within 1 year
Notes Payable
Accounts Payable
Accrued Liabilities
Long Term Debt
EQUITY
Retained Earnings—the amount of net income the company has earned and kept since the first day of the business, less dividends to shareholders
