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Financial Statements: Balance Sheet

A well managed business establishes an accounting system which will provide the needed financial statements that will help manage your business. Lenders require financial statements when you seek financing.

A financial statement summarizes a company’s assets, liabilities, and owners’ equity at a specific point in time. Balance sheet data is continuous in that it continues and accumulates data throughout the life of your business. The balance sheet reflects what the company owns and what it owes, as well as the amount invested by the owner or owners. The balance sheet follows the formula of Assets=Liabilities+Owners’ Equity.

Each of the three sections of the balance sheet has many accounts within it, documenting the value of each one. Assets are accounts such as cash, inventory, fixtures, and property. Liabilities are accounts such as accounts payable and notes payable to lenders.

Accounts on a balance sheet differ from company to company and by industry, as there is no set template that accurately accommodates the differences between different types of businesses.