Balance Sheet Template Personal Balance Sheet Template Australia Balance Sheet Template Xls Uk Balance Sheet Template Word Personal Balance Sheet Template
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Understanding the different types of financial statements that can be prepared for your business and being fluent with the information each contains helps you better understand your financial position and make more informed decisions about your business. Remember - forewarned is forearmed...and you can t manage until you measure! That being said I have found that a critical measuring tool - the Balance Sheet - is often overlooked by small business owners - likely because they don t understand its importance. Let s see if we can change that... The Balance Sheet is merely a snapshot of your company s financial position as of a given point in time. Today s balance sheet could be different tomorrow - simply by writing out a check or invoicing a client. This financial statement provides the details your assets liabilities and equity - the three components of a business financial accounting - as of a particular date. Although balance sheets may be created as of any date they are typically prepared at the end of an accounting period such as a month quarter or year.
If you are managing your money to deal with life s challenges and planning your personal finances with your retirement in mind your Net Worth should be positive and growing. If your Net Worth is positive you can ride out financial storms like the current situation. At the time of your retirement your Net Worth must be substantially positive so that you will be able to keep costs down and have investment income to replace your working income. During your working years your Net Worth should be growing steadily because a retirement nest egg does not grow without years of nurturing. • There are circumstances where it is acceptable to have a Net Worth of Zero or near Zero. The first is when you are just starting out.
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This could be cash or real estate or stocks and bonds or machinery and equipment or accounts receivable or other moneys due to you. It could also include inventory which is product that you have produced but not yet sold. So to summarize assets are usually either cash something that you have bought something that you have made and that you expect to sell or something that is owed to you. Clearly then if you want to make your balance sheet you must have a list of your assets and how much each is worth. The rub lies in the worth or valuation of the assets. "Hmm you think I bought this asset ten years ago at 10 grand I added 5 grand in improvements to it it would cost me 20 grand to replace it and I could get about 18 grand on the open market for it so what value should I put down for it?" Clever question my dear reader! Well as you may have assumed we accountants have put a great deal of thought into these issues and we continue to think about and tweak the ways we value things to this very day.