Though a balance sheet is not formally required for most small business reports or even taxes, it can be helpful in determining the overall health of a company. Without an understanding of basic accounting principles, it may be overwhelming to think of creating a balance sheet or any other financial report. However, balance sheets can be quite simple for a small business owner to create and can even be generated automatically by most online or traditional accounting software.

Ads by Google

QuickBooks™ P&L Statement
Create Profit and Loss Templates Quickly & Easily. Try Free Today!www.intuit.co.uk / SelfEmployed

Business Snapshot

As a small business owner, you may turn to either your balance sheet or profit and loss statement to understand how your business is doing financially. Whereas your profit and loss statement can quickly show your expenses versus your income, it doesn't specify your current assets and pending liabilities like a balance sheet does. While many other financial reports simply show you transactions that have already occurred, a balance sheet gives you an idea of things that need to occur soon. If you've just made a huge sale, your profit and loss statement may show your "business health" as great, whereas your balance sheet would also show the huge bill you owe a vendor within the next 30 days. It is a more accurate picture of your business's status.

Investors and Loans

Your balance sheet is an ever-changing document on which you constantly write in new assets you acquire or new liabilities that your company undertakes. When updated frequently, your balance sheet will give potential lenders and investors the information they need to make informed decisions about lending you money or other resources. It shows your business assets, liabilities and net worth, and when compared to earlier versions, your current balance