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About this lesson

Let's learn how to locate the balance sheet report, and we'll review what is seen there.

Quick reference

Balance Sheet introduction

The balance sheet report is a summary of what you own, what you owe, and the owner's money.

When to use

You'll want to review the balance sheet as one of your tools to keep an eye on the health of your business. But also to watch for mistakes in your bookkeeping that are sometimes overlooked.

Instructions

Locating the balance sheet:

  • In the left hand menu, click on the word reports
  • In the favorites box, click on the text balance sheet (note: if you click on the star, this report will no longer be in the favorites box)

Reading the balance sheet:

  • The balance sheet comes in three parts: assets, liabilities and equity
    • Assets are the things you own such as your cash and inventory
    • Liabilities are things you owe such as credit card debt, loans, and payroll taxes
    • Equity is everything else such as the retained earnings, owner investment, owner withdrawal and current year net income

Hints & tips

  • The balance sheet is a running total that includes all related transactions in your QuickBooks file. It is not based on a specific date range like the profit and loss is,
  • If you see a number on your balance sheet that is very wrong, that often means something is wrong on your profit and loss and you just haven't found it yet. Use the balance sheet as a tool to catch mistakes.
  • The accounting equation is that total assets always equals total liabilities plus total equities. You don't have to worry about making this happen, QuickBooks will automatically do this for you.
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  • 00:04 In this video, I want to introduce you to the balance sheet.
  • 00:07 The balance sheet is the summary of what you own, what you owe, and
  • 00:12 the owner's money.
  • 00:13 To get to the balance sheet, I'll have you click on Reports on the left hand side.
  • 00:18 When this opens on, I'll have you click on Balance Sheet in the top.
  • 00:23 The balance sheet, unlike for profit and loss, is not for a specific period.
  • 00:28 Rather it's as of a given date.
  • 00:31 So it's your running balance in your checking account from the beginning of
  • 00:35 time up until this date.
  • 00:37 Same thing for the petty cash, then deposited funds,
  • 00:40 everything that you see here.
  • 00:42 The balance sheet is organized like a teeter totter that's in perfect balance.
  • 00:47 You have the assets, which always equal your liabilities plus your equity.
  • 00:53 Your assets are the things that you own.
  • 00:57 So you own your checking account balance, you own your petty cash.
  • 01:01 You own your assets like your speedy car.
  • 01:05 Down below for your liabilities, it's the things that you owe.
  • 01:09 So you owe your loans if you have any business loans,
  • 01:12 you'll owe your business credit card.
  • 01:15 You'll owe any sales tax you've collected.
  • 01:18 Then there's the equity section.
  • 01:20 The equity section contains stuff such as retained earnings.
  • 01:24 Retained earnings is the running balance of previous years in that income or
  • 01:29 net loss.
  • 01:30 So in this example, the year 2019 had a net loss of $38.
  • 01:36 The net income underneath that is the running balance of the net income or
  • 01:42 the net loss of the current year through this date.
  • 01:46 Your equity section might have more stuff such as owner's investment and
  • 01:51 owner's draw.
  • 01:52 In this example, we don't have those things that our balance sheet.
  • 01:57 When you look at your balance sheet,
  • 01:58 I want you to have a really good sense of what you're looking at.
  • 02:01 So this top section is your bank accounts.
  • 02:04 If you want to know more about your bank accounts, you can click on the number.
  • 02:09 And this pulls up a report.
  • 02:11 Alternatively, you can go to your chart of accounts, so accounting and
  • 02:15 then Chart of Accounts and you can look at these things.
  • 02:19 Anything that says View register on the right hand side.
  • 02:23 That means that it's an account that you will see on your balance sheet.
  • 02:26 So we'll go back to the balance sheet real quick.
  • 02:30 Your balance sheet is grouped up in sections.
  • 02:34 So you've got your bank account, your other current assets,
  • 02:37 your fixed assets, and then you have your current liabilities, a sub account,
  • 02:42 you have credit cards, then you have your actual credit cards.
  • 02:45 When you look at these account groupings,
  • 02:47 they're going to match the account groupings on your chart of accounts.

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