You can be on Entrepreneur’s cover!

Balance Sheet Get a snapshot of your business's financial health with a balance sheet.

entrepreneur daily

The balance sheet provides a snapshot of the business'sassets, liabilities and owner's equity for a given time. Again,using an apparel manufacturer as an example, here are the keycomponents of the balance sheet:

  • Current assets: These are the assets in a business thatcan be converted to cash in one year or less. They include cash,stocks and other liquid investments; accounts receivable;inventory; and prepaid expenses. For a clothing manufacturer,inventory would include raw materials (yarn, thread, etc.),work-in-progress (started but not finished), and finished goods(shirts and pants ready to sell to customers). Accounts receivablerepresent the amount of money owed to the business by customers whohave purchased on account.
  • Fixed assets: These are the tangible assets of abusiness that will not be converted to cash within a year duringthe normal course of operation. Fixed assets are for long-term useand include land, buildings, leasehold improvements, equipment,machinery and vehicles.
  • Intangible assets: These are assets that you can'ttouch or see but that have value. Intangible assets includefranchise rights, goodwill, noncompete agreements, patents and manyother items.
  • Other assets: There are many assets that can beclassified as other assets, and most business balance sheets havean other assets category as a "catch-all." Some of themost common other assets include cash value of life insurance,long-term investment property, and compensation due fromemployees.
  • Current liabilities: These are the obligations of thebusiness that are due within one year. Current liabilities includenotes payable on lines of credit or other short-term loans, currentmaturities of long-term debt, accounts payable to trade creditors,accrued expenses and taxes (an accrual is an expense such as thepayroll that is due to employees for hours worked but has not beenpaid), and amounts due to stockholders.
  • Long-term debt: These are the obligations of thebusiness that are not due for at least one year. Long-termliabilities typically consist of all bank debt or stockholder loanspayable outside of the following 12-month period.
  • Stockholders' equity: This figure represents thetotal amount invested by the stockholders plus the accumulatedprofit of the business. Components include common stock,paid-in-capital (amounts invested not involving a stock purchase),and retained earnings (cumulative earnings since inception of thebusiness less dividends paid to stockholders).

Excerpted from Start Your Own Business: The Only Start-UpBook You'll Ever Need, by Rieva Lesonsky and the Staff ofEntrepreneur Magazine, © 1998 Entrepreneur Press

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick


Look Sharp with This Gillette Body Razor Set for $15

This Gillette Body Razor comes with nine refill blade cartridges and is on sale for $14.99 (reg. $24) for a limited time only.

Business News

James Clear Explains Why the 'Two Minute Rule' Is the Key to Long-Term Habit Building

The hardest step is usually the first one, he says. So make it short.

Business Solutions

Keep Inspiration in Reach with Nix Color Sensor, Now $60 for One Week Only

Scan any surface and get a detailed report of the color you're looking for.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business Solutions

Set Your Team up for Success and Let Them Browse the Internet Faster

With ad blocking, Control D is $35 through April 21.

Business Solutions

Grab Microsoft Project Professional 2021 for $20 During This Flash Sale

This small investment is well worth the time it will save your team in organizing and monitoring project work.