The Balance Sheet: A Snapshot of Your Business
While the P&L shows performance over time, the balance sheet shows your financial position at a specific moment. It follows a simple equation: Assets = Liabilities + Equity.
Assets (What You Own)
Cash and bank accountsAccounts receivableInventoryPrepaid expensesEquipment, vehicles, propertyLess: accumulated depreciationLiabilities (What You Owe)
Accounts payableCredit cardsShort-term loansAccrued expensesMortgagesLong-term loansEquipment financingEquity (What's Left for Owners)
Owner's investmentRetained earnings (accumulated profits)Current year net incomeKey Ratios to Monitor
Current ratio: Current assets ÷ current liabilities (liquidity measure)Debt-to-equity: Total liabilities ÷ equity (leverage measure)Monthly balance sheets help you track financial health over time.
