The Small Business Specialists
Phone: 13 12 49
The balance sheet provides a good picture of the financial health of a business and is a tool used to evaluate a business's liquidity. It helps a small business owner identify trends and quickly grasp the financial strength and capabilities of their business.
The balance sheet is the financial statement used to report on the financial position of the business to the owner and other stakeholders such as banks and investors.
The balance sheet is a statement of what a business owns (assets) and owes (liabilities), and the value of the owner's equity (or net worth of the business) at a specific point in time. The balance sheet is also known as a statement of financial position because it shows a summary of the business’s financial position at a particular point in time.
The difference between the assets and liabilities is known as owner’s equity. The balance sheet is so named because the equity must equal assets minus liabilities.
Sole traders and partnerships are not required to prepare and lodge a balance sheet with their annual tax return.
A balance sheet enables you to: