In accounting, the Balance Sheet has been an important element for hundreds of years.
Balance sheets provide details of what a business owns, what it owes, its overall worth and also how shareholders funded the Net Assets. The name ‘Balance Sheet’ is derived from the need to balance assets against financial obligations, retained earnings and equity investment (collectively known as liabilities and shareholder equity). Both sides of the equation have to be equal – hence the ‘balance’ part of the name.
The balance sheet can help you learn a lot about your business that you were not previously aware of. For example, you will be able to tell if you own more than you owe and also whether the debt you must re-pay is derived from short-term recent purchases or long-term on-going financial obligations. In addition, you can see if the business has grown organically over a period of time or whether it has been artificially boosted by shareholder investment.
The Balance Sheet is simply is a list of your assets and how much you still owe on those assets. The result of this calculation is the value of the business. To find out how our Accounting Software could help your business, speak to one of our Specialists today.