Hey, it's Candus and in today's QuickBooks tips and tricks,
I want to teach you how to read your report.
So you'll hear me oftentimes talk about reports, why they're so important,
understanding them to make business decisions.
So recently, I was asked a question about the balance sheet and I think
oftentimes, it's misunderstood because people just don't get
what the purpose of the balance sheet is, or what even belongs
on the balance sheet. They're always like, why is it not over here?
How do I find it? What goes there? So today,
I want to teach you what actually goes on the balance sheet,
so that when you're looking for it, you can find it, again, to make business decisions.
So come look over my shoulder, and I'll teach you how.
Alright, let's get in and I will show you all about the balance sheet.
So first, I'm gonna teach you how to pull up the balance sheet and then we're going to talk about
the different things that belong in each of the areas.
So the first thing you're going to do to pull up the balance sheet is you go
under reports, company and financial and you will see
balance sheet standard, we're gonna select that
and the first thing to know about the balance sheet is it represents a
company's financial position at a specific date.
So what that basically means is, it's a snapshot of whatever date you
pick up what happened up to that date. So this one is as of
December 15th, if you changed it to December 31st, it would
change. But is as of that moment, a profit and loss statement of
cash flow, they are from one timeframe to another
and so it's what happened throughout that span, a balance sheet is
everything that happened up to the moment you run it.
So hopefully that is clear. So the first area on a balance sheet is
the assets and there are a lot of different types of assets.
But assets are the things that you own, or things you basically
acquired through transactions that you've done.
In other words, your checking account has increased through services that
you have provided. So there's a lot of different types of assets
there are, like checking and savings or what's considered
current assets and you have accounts receivable under
current assets, so all your different check, checking accounts,
savings accounts, accounts receivable, and then
you have what's called other current assets and other current
assets are things that are going to be used up within the year.
So prepaid insurance, undeposited funds, those kinds
of things, then you have fixed assets, these are all the
different types of assets and fixed assets are usually
significant purchases, like vehicles, land, buildings, those
kinds of things. So those are all your different types of assets
and then in this example, I'm going to simplify these
so it's easier to look at.
So basically, what it comes down to
is you have in this one, we have current assets, fixed assets,
part of the current assets of the bank accounts as well, then
that equals 162,852.85. Then you have your liabilities,
which your liabilities are going to be like your accounts payable,
any credit cards you have, you'll notice that's what these are
accounts payable, credit cards, and then you have other current liabilities
and those are the things that you owe in less than a year
In other words, those are like your payroll liabilities,
your sales tax, those kinds of things and then
you get your long term liabilities, that you're gonna
that's going to be longer than a year. Your property loans or
different kinds of loans, that you have bank loans,
those are long-term. So those are all your different types of liabilities.
Then you come down and you have your equity and your equity has
to do with the amount of money you either put into your
business as in capital, the amount of money you took out in
draws if you're a sole proprietor, and then the,
so that's what this is, it's like the opening balance, the draws
that they've taken out, and then the retained earnings, and then
from year to year, and then the current net income of the current year.
What this is basically telling you is that
your assets equal the same thing and your liabilities and your
equity, equal your assets. So see how this is 162 and this
another 162. These equal each other, another way to say that is
your owner's equity equals your assets minus your liabilities.
So either way you do it, it's the same thing.
So your assets are things that you have liquid, basically cash and properties
and that type of stuff minus your loan, the people you owe or
your creditors gives you your equity or the amount of,
the amount of money that your business is worth.
So what this does is it gives, if you were going to go out and get a loan,
it gives your bank a snapshot of what is happening within your business.
How liquid are you? How much do you owe and
how much equity do you have in your business
at the time that this was created.
Now a lot of people get confused when they're looking at the profit and loss.
They think that the money that they take out is a draw.
Meaning they just took cash right out of their business
should show up on the profit and loss, they think of it as a
business expense, it's actually not a business expense,
it is taking money out of your equity or money away from your business.
So another way to know where to put different types of
items on your balance sheet is to go up under lists,
Chart of Accounts. All of these are type of a chart of accounts.
So to the right here, you'll see, you know, current asset,
accounts receivable, fixed assets, and all that kind of stuff.
Well, if you were like, I have no idea which one it belongs in, if you go
down to account and click New. As you're adding different accounts.
If you go over here, and you click fixed major asset,
it'll tell you what that is, it's a significant item and
you're going to, it's going to be useful for more than one year.
And if you're gonna use a bank account, that's obviously a bank.
If you have a loan, it's a loan, credit cards, equity,
it tells you what the equity is, and then other ones are down here.
So this is where a current asset would be other asset,
your long term loans, and those kinds of things.
But just know that really, the balance sheet fills in the gaps for profit and loss statement.
So the profit and loss shows your income minus
your expenses and then that shows up here, the difference.
Your actual net income shows up here but what the balance sheet
gives you is what... What amount of assets do you have?
Meaning? How much cash do you have in the bank at this moment?
What other kinds of you know loans? Or different things do you have?
Which is your liabilities? Who do you owe?
And then how much do you have in your, how much is your business
basically worth? What is your equity in your business?
So I hope that has been beneficial for you.
If you have any more questions about understanding the balance sheet,
feel free to contact me. It really is just a snapshot of the overall picture of your business,
the health so to speak of your business.
Have an amazing day. Don't forget, if you enjoyed this video,
please share it and if you'd like to get more videos,
I do these tips and tricks weekly. Feel free to subscribe, and
Confidence with QuickBooks is now available, it is my online course.
If you're wanting to really understand QuickBooks, in a simple way,
from an entrepreneurs point of view, which is what I am,
feel free to go to confidencewithquickbooks.com
and check it out. Have a great day.
Talk to you guys next week. Bye.