Issue link: http://cp.revolio.com/i/142672
balance sheets The balance sheet is a snapshot of your company's financial position at a specific moment. It tells you what you own (assets), what you owe (liabilities), and the extent of your ownership Typically, a balance sheet is compiled after the books have been closed for a specified period, such as a month, quarter, or year. The sheet will consist of three major categories: assets, liabilities, and equity. Assets Start drafting a balance sheet by listing the value of the business' assets—in other words, period. Also add income from any assets converted to cash (sold). Don't forget to add the value of the checking and savings accounts, as well as other short-term investments. • Accounts receivable. Include debts owed to the business by clients. You'll want to allow for some bad debt, as you might not be able to collect all that is due. (equity) in the company. Used primarily to track inventory or fixed assets, the document is a vital financial record, because it can help you analyze and identify trends. Comparing balance-sheet data from the most recent accounting period with data from previous periods can help you visualize the financial state of your business and provide information to help you make decisions about cash, credit, supplies, and other issues. "If you owe more than you own, it's not a healthy sign," says Alice Magos, author and certified financial planner. If you have allowed clients to get behind in their payments, the balance sheet will help you determine whether the accounts receivable are getting out of hand relative to the amount of cash you have. If you sell literature, training tapes, or nutritional supplements, the balance sheet will help you determine whether sales are keeping pace with inventory. If you have put some of your cash in stocks or bonds in order to boost income, you can gauge their performance over time. anything of value, including cash, equipment, stocks, buildings, and land. Assets are divided into two categories: current and long-term (or fixed) assets. Current assets • ash. Include all income for C services rendered and products sold during the accounting • repaid expenses. If you paid P a security deposit when you leased an office, for example, and the deposit is considered your last month's rent, mark it down as a prepaid expense. Prepaid insurance premiums also qualify.