Mon. Mar 4th, 2024

A balance sheet is an accounting equation that monitors three accounts: assets, liabilities, and equity. Each account has a debit side and a credit side. Debits are what you spend money on, and credits are where the funds came from. A balance sheet shows the amount of each side and ideally, both sides should equal each other. The exact way that you organize these accounts will depend on your chart of accounts. A balanced sheet is one of the most important financial statements for any business. It will help you monitor the health of your company, determine whether it can meet its debt payments and allow potential lenders to assess its prospects.

Assets include any type of value that your business has, including cash, investments and property. A more detailed breakdown of these accounts includes current assets, which are items that will be used up or converted to cash within a year of the date of the balance sheet, and noncurrent assets, which are those that won’t be spent in that time frame. Prepaid insurance, inventory, temporary investments and accounts receivable are some of the most common current assets. Other assets might include the cash surrender value of life insurance on officers, building construction costs and miscellaneous cash held for special purposes.

Liabilities include any debts or taxes your company owes, as well as outstanding loans. It will also include any other amounts owed to shareholders, such as dividends or repayment of capital. A calculation of current liabilities will also include accounts payable, which are expenses that need to be paid within a year of the balance sheet date. Bilanz Hattingen

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