Balance sheets

Every business owner has the responsibility to know the financial health of their business.

They have to be informed of their company’s financial standing through the creation and analysis of balance sheets that cover a certain period of time.

Balance sheets

What are balance sheets?

Balance sheets are one of several financial statements that shows the financial wellness or position of a business for a specific period or coverage.

Depending on your business’s requirements, balance sheets can be prepared:

  • Monthly
  • Quarterly
  • Biannually (twice a year)

Balance sheets are generally divided into parts; these parts are essential in preparing accurate and up-to-date balance sheets.

Balance sheets

What’s in a balance sheet?

When we talk about balance sheets, we must look into the three most important parts:

  • Assets – refers to the the things your business or company owns
  • Liabilities – any amount the company owes to either a bank, a lender or a supplier
  • Equity – any money that’s left after liabilities are subtracted from assets

Why are balance sheets important?

Along with income, balance sheets are important because they help business owners analyse the financial health of their company.

Balance sheets are critical and vital documents that allow businesses to understand their financial standing. Accurate and detailed balance sheets can also help if your business is seeking a loan and are also critical when speaking with current and future investors.

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