Understanding the Balance Sheet: Asset, Liability and Equity | QuickBooks Online Tutorial 2018

Understanding the Balance Sheet: Asset, Liability and Equity | QuickBooks Online Tutorial 2018


The balance sheet is used to track all of the assets, liabilities, and equity of a business. You can access the balance sheet by clicking Reports over on the left nav bar and then balance sheet underneath Favorites. The balance sheet displays what the business owns and what the business owes as of a single day. This can be seen as a snapshot of your business. The first section of the balance sheet are the company’s assets. This is what the business owns. First, you can see the business’ bank accounts followed by accounts receivable. This is a record of what your customers currently owe you. There are also other current assets, these are assets that you plan on selling within one year. And then finally, fixed assets. These are large purchases that a business uses over the course of several years. Scrolling down, the second section of the balance sheet is liabilities and equity, this is a measure of what the business owes. The first section of liabilities and equity is liabilities, this is what the business owes to people outside of the business. First is account payable, this is what the business currently owes on open bills. Followed by credit cards, then other current liabilities, like lines of credit. And then finally, long-term liabilities, which are larger loans that take several years to pay, like small business loans or car loans. The final portion of a balance sheet is equity. This is what the business owes to the owners. Essentially, this is the value of the business from the point of view of the people that own the business. The basic accounting equation at the heart of the balance sheet is Assets=Liabilities + Equity. So basically, if we took everything that the business currently owns, so all of the assets worth $52,234.96 sold it all off. The first people that we would have to pay off are people outside of the business. So we would pay them $18,068.27. Then the money that we have left over after we pay off all of our vendors and creditors is what the business is worth to the owner, $34,166.69. And that’s what you would get to keep. Monitoring your balance sheet on a regular basis is integral to maintaining the health of your business. [MUSIC]

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