Archive May 11, 2021

Sections of the Balance Sheet

One of the reports used by a small business to assess their financial story is the Balance Sheet. The Balance Sheet is a financial report listing the assets, liabilities, and owner’s equity (or net assets) of an organization.

Balanced Financial Scale

Assets = Liabilities + Owner’s Equity (Net Assets)

The balance sheet is important because it reports on what the organization owns, what it owes, and its net value.

The report may also be referred to as a Statement of Financial Position.

Calendar illustrating Financial Statment

The values reported on the Balance Sheet are as of a specific point in time.

Sections of the Balance Sheet

Assets – what a company owns

  1. Cash – in the bank now
  2. Accounts Receivable – money owed TO the organization
  3. Investments – savings, inventory, raw materials
  4. Fixed Assets – tangible property or equipment used in operations
  5. Other Assets – prepaid expenses

Assets can be further defined as either short term/current or long term/non-current. Short-Term assets can be easily converted into cash or are typically used within twelve months. Long-Term (non-current) assets have a “life” of longer than one year, either by use or conversion into cash.

Fixed assets are tangible items with a use of longer than one year. As the fixed assets are used, their value decreases. Depreciation is the calculation recorded to lower the holding value of the fixed assets. When an asset is sold, the amount received may not be equal to what is recorded in the books. Depreciation is an estimated calculation. Generally accepted tables and guidelines are available to help with these calculations.

Liabilities – what a company owes

  1. Debt – credit card, loans, money borrowed

  2. Sales Tax – collected from customers due to the government
  3. Payables – expense due, and not yet paid
  4. Customer Credit and Gift Cards
  5. Unearned Revenue

Owner's Equity (Net Worth or Net Assets)

The value left after Assets are reduced by the outstanding Liabilities. The amount that the owner could put into their pocket after settling their debts.

Assets – Liabilities = Owner’s Equity (Net Assets)


A Sample Balance Sheet

What the Financial Story?!? How Reports tell a Story about your Small Business

“I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant.” Alan Greenspan

brain with a text bubble

As a small business financial advisor, I aspire for my clients to experience business success. And one method to achieve success is for them to comprehend the financial side of their business.

From that paragraph did you get the message I intended, or did you just read:   “blah, blah, blah”

How about this statement:

I want you to be successful and understanding your business’s numbers helps you make smarter business decisions.


How Financial Reports help with your small business story

One way to tell the story of your small business is through Financial Reports. Reporting provides insights into what is happening with the business. How are sales trending, how about expenses, how is cash really being used?

When you look at your business’s financials does it look like this:

jumble mess of numbers
a jumbly mess of numbers



Or do you feel like your numbers look like this?

Happy numbers
These numbers are happy and orderly with a story to tell

How your Financial Advisor can Help

Your financial advisor is the one who helps to take your small business numbers from a jumbled mess to an orderly message.

 An orderly financial message is conveyed through various reports. Reports are used to understand the financial story of the business. This information helps you to make more informed decisions. And when you make informed decisions your business is more successful!

Some of the Most Common Financial Reports

  1. The Balance Sheet
  2. The Income Statement
  3. Cash Report
  4. KPI’s (Key Performance Indicators)
  5. Sales Reports
  6. Donor reports
  7. Variances of Budget vs Actual
  8. and on, and on…

Because each business is unique, the reports a business finds useful are unique.

In the next post we will leap into the Balance Sheet.

Share below if there is something financial about your small business you wish you knew more about.