A business balance sheet weighs your company's assets minus its liabilities, offering a snapshot of your company’s financial situation at a specific moment. Balance sheets are useful for assessing your overall financial situation and also for presenting this assessment to potential investors and creditors who may have a stake in your company’s financial future. A resourceful entrepreneur may operate a business indefinitely using credit and floating checks, but an honest and accurate balance sheet looks beyond short-term strategies and short-term cash flow and focuses on real assets and liabilities.
List all of your company’s assets on the top section of your balance sheet. Include cash on hand as well as the value of your inventory. Use a clear standard for valuing your inventory, such as the price you paid or the fair market value, and be transparent about the standard you are using by including a footnote describing the convention you chose.
Your list should also include money that is owed to you such as accounts receivable, or invoices representing sales for which you have not yet received payment. Also list the value of your equipment, starting with the price you paid and adjusting this amount based on the depreciation period you chose and the amount of time you have owned the item. For example, if your restaurant owns a dishwasher that cost $5,000 and you are depreciating it on a five-year basis, list its value as $3,000 if you have already owned it for two years. If your business owns property, list it as well and depreciate its value depending on the depreciation convention you are using.
List all of your company’s liabilities on the bottom section of your balance sheet. List all money you owe, including unpaid invoices and balances on credit cards and business loans. If you have an unpaid balance on a mortgage for a piece of business property, include this amount. Also include payroll liabilities for hours that your employees have already worked and for which they have not been paid.
Record taxes that you owe in the liabilities section of your balance sheet. Your listed tax liability should include unpaid balances from prior tax periods as well as taxes for current periods for which you have not yet filed. For example, if your sales tax is due at the end of each month but you are compiling your balance sheet in the middle of a month, include the amount that you owe on sales from the first half of the month.
Add the total amount of the assets you have listed. Separately add the total amount of your company’s liabilities. Subtract your business liabilities from your business assets to calculate your company’s net worth.
Devra Gartenstein is an omnivore who has published several vegan cookbooks. She has owned and run small food businesses for 30 years.