What Is a Balance Sheet? And Why Does Your CPA Ask for It?
Ask the Accountant…
Question: My CPA always asks for a balance sheet, but I don’t know what that is exactly.
Answer: A balance sheet is one of the two standard financial statements that describes the condition of your business. (The other is an income statement.) Your balance sheet is a snapshot of a particular day in your business, and the date is at the top.
A balance sheet lists your assets, liabilities and equity. Assets are what you own, liabilities are what you owe, and equity is the difference between the two. On a very basic level, your equity is what your business is worth on that day.
As an example, consider owning a home. If you paid $350,000 for a home (your asset) and have a mortgage with a current balance remaining of $200,000 (your debt or liability), you have equity in your house of $150,000 ($350,000 minus $200,000). In a simplistic sense, this is the balance sheet of your home. It is similar to the balance sheet of your business.
Please email your questions to Harriet at Ask The Accountant.
QuickBooks Premier and Enterprise can be modified to better serve ad specialty distributors. Harriet Gatter is a QuickBooks ProAdvisor, a former accounting professor and a former ad specialty distributor. She advises ad specialty distributors to use QuickBooks Premier and Enterprise, often in conjunction with other industry-specific software, to manage the complexities of the ad specialty business, with the results being time saved, errors eliminated and an overall accurate accounting of your business. Contact her at firstname.lastname@example.org.