One of the basic tools that every entrepreneur should have is a balance sheet. A balance sheet is nothing more than a financial statement that shows the state of a company’s assets and liabilities at a given time. The balance sheet is therefore a very important tool that helps in making business decisions.
What is a balance sheet? Definition of the term
The balance sheet is the basic financial document that shows the property and financial situation of a company at a given time. The balance sheet consists of two parts: assets and liabilities. Assets are all cash and other values that a company has.
Liabilities are all liabilities to other parties. The value of the balance sheet is zero when the value of assets is equal to the value of liabilities.
Features of a balance sheet
The balance sheet is the basic financial document that determines the state of a company’s assets and liabilities at a given time. The balance sheet consists of two parts: assets and liabilities. Assets are all the cash and valuables that a company has. Liabilities, on the other hand, are all debts and liabilities to other parties. The balance sheet should be prepared at least once a year, and its purpose is to determine the financial position of the company at a given point in time.
Balance sheet – when does it need to be prepared?
The balance sheet allows you to assess the financial condition of the company and its possibilities for further development. That is why it is so important that it is accurate and in line with reality. It is worth remembering that the preparation of the balance sheet is not just calculations. It is also data analysis and interpretation. Therefore, it is worthwhile to outsource this task to professionals – accountants or auditors. Of course, you can also try to prepare the balance sheet on your own, but without adequate knowledge and experience it is very difficult. In conclusion, the balance sheet is a very important document for any company. It should be accurate and in accordance with reality, and it is best prepared by a professional.
Balance sheet layout
A well-maintained balance sheet allows you to quickly identify problems and take remedial action. Unfortunately, many entrepreneurs conduct business without a thorough understanding of this and often end up in a situation where it is too late to salvage the situation. That’s why it’s so important to regularly monitor your finances and be aware of what’s happening to your balance sheet. Remember that assets are not just cash – they also include investments, real estate or intangible assets (such as a patent).
Liabilities, on the other hand, can include not only loans and advances, but also all kinds of debts to authorities or insurance premiums. The financial balance sheet should be conducted regularly – at least once a month. It is also a good idea to conduct additional periodic analyses (e.g. quarterly or annual) to better monitor your finances. Well-run finances are the foundation of any success!
