Small business owners should be familiar with their balance sheet in regards to how solvent the company is. There are a list of terms that help in understanding the balance sheet.
Balance Sheet Accounting Terms
Small business owners should be familiar with their balance sheet in regards to how solvent the company is. There are a list of terms that help in understanding the balance sheet:
Assets- Can be current (used within a year) or fixed (benefits last longer than a year. Examples of current are: Cash and Accounts Receivable. Examples of fixed are building and machinery. Cash- Consists of currency/coins on hand, checks from customers, balance in bank accounts. Accounts Receivable-The amount of money owed to the business by your customers after goods and/or services have been provided. Inventory-An asset of the company, value of products waiting to be sold.
Liabilities-Can be current (debts payable within a year) and long-term (debts payable over a period of time greater than a year) Accounts Payable-The amount of money you owe creditors in return for goods and/or services delivered. Usually paid on terms of 30, 45 or 60 days. This is a current liability. Loan Payable- An example of a long term liability, bank loan payable over a period of greater than a year.
Current Year Income (Loss)- A company’s total earnings in the current year. Retained Earnings-Earnings that are reinvested in the company and not paid out as dividends.
