Balance sheet explained
A balance sheet is a snapshot on one date. On one side are the assets, everything the business owns or is owed, such as cash, receivables, inventory and equipment. On the other are liabilities, what it owes, and equity, the owners’ stake. The two sides always match: assets = liabilities + equity.
Assets and liabilities are usually split into current (turning into cash or due within a year) and long-term. Comparing current assets with current liabilities shows whether the business can cover its short-term bills; that difference is its working capital.
Equity includes what the owners put in and the profits kept in the business over time, its retained earnings. This year’s profit so far flows in from the income statement, which is how the two reports connect.
Example: a small business balance sheet at June 30
Total assets of $28,000 are matched by $10,000 of liabilities and $18,000 of equity:
| Section | Account | Amount |
|---|---|---|
| Assets | Cash | $15,000 |
| Accounts receivable | $4,000 | |
| Equipment | $9,000 | |
| Liabilities | Accounts payable | $3,000 |
| Equipment loan | $7,000 | |
| Equity | Owner’s capital | $12,000 |
| Retained earnings | $6,000 | |
| Check | Assets $28,000 | Liabilities + equity $28,000 |
Where you’ll see it in fiscal50
fiscal50’s Balance Sheet runs on a cash or accrual basis for any date, as one column or as periods side by side by day, week, month, quarter or year, with the change in dollars and percent between columns. Total Assets always equals Total Liabilities & Stockholder’s Equity; if it ever doesn’t, a message shows above the report.
Click any account to open its ledger. On Business Pro, prior-year balance sheets from before your books started can be uploaded and compared.