accounts
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- ACCOUNTING
- We hope to see if we are in a position to start a business.
- My husband and I are planning to start a business together and we're wondering about our financial situation.
- Alright, sorry for the holdup. Let's get started, shall we?
- Yes, a balance sheet is one of the financial statements used in business, it is prepared to show the financial position of a business or individual. If the information in the balance sheet is correct, the left and right side will balance, that is, will be equal in value.
- A balance sheet?
- Okay. I think the best thing to do right now is to make abalance sheet.
- The information on the left side are your assets, which are things a company or individual own such as cash, buildings etc. These also include things paid in advance that have not yet been used, such as prepaid insurance, prepaid rent.
- Oh, ok. So what exactly is the information on the left and right side?
- The right side includes all the liabilities, they are amounts owed to creditors for a past transaction and they usually have the word "payable" in their account title. For example, if you purchased a music player for ₹150 and put ₹50 toward a down payment, you have debt or liability of 1₹100.
- It also includes owner's equity which can be thought of as a source of the company's assets. Owner's equity is sometimes referred to as capital or just equity. It is the book value of the company.
- Some other terms you will use in a balance sheet includes bills receivable which represents the debts of customers. An example would be your friend owing you ₹100. bills payable which represent debts owed by the business/individual, which could be you owing ₹100 to a friend.
- Yes, but there are few things to follow when making your balance sheet
- A balance sheet?
- Assets are listed in order of liquidity—the order within which an asset can be converted immediately into cash.
- So with our balance sheet we'll be able to see our financial situation?
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