How To Read A Balance Sheet

Why is a balance so important to your business?

As a business owner, understanding what is in your Balance Sheet is fundamental in growing a great business.  This video discusses what things are and why in your Balance Sheet.

What is A Balance Sheet?

Today I want to talk about balance sheets or what are otherwise known as a statement of position.

A balance sheet provides you with the financial position of your business. It includes and lists the assets, liabilities, and owners’ equity at any given point in time and illustrates the financial health of your business and its net worth.

Your balance sheet is the most important statement of three, the other two being the income statement and cash flow statement.

What I found is the balance sheets are a bit more complex to understand but they fulfil the picture with the profit and loss.

What you might expect to be in a profit and loss pops up in the balance sheet and so without both of them you don’t actually get a full understanding of the business. For people who are very knowledgeable such as accountants will love the balance sheet.  They will say ” everything’s in there that we need to know”!

As a business owner you need to understand the components of a P&L and where certain things appear in there and what they mean and why are they there helps you out.

Check out the video above for a typical balance sheet derived from Xero accounting package.

If you got any questions don’t hesitate to contact me and keep your eyes out for other videos that are coming up especially around break-evens and and profitable losses that i’ve done previously and the best way to get informed of those is to subscribe to my channel so thanks for listening again and any questions are welcome to hear from you.