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Why a Balance Sheet is Important- Part 1 |
Article Submitted by: Vibha Babbar
Sunday, 28 December 2008
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There is a need to strike a right balance everywhere. When it comes to finances, the need to maintain a balance shouts its importance. A Balance Sheet, as the name suggests, shows a balance of your finances, in a clear, detailed and explained way. It is a financial statement that serves as a comparison between "all" monetary obligations and "all" owned property, to calculate the current financial position of the company/ firm/ organization/ household. Maintaining an up-to-date balance sheet helps you recognize your finances, and in much broader terms, your assets, liabilities and equity. It is an important tool in gaining an insight into a company and its operations. The importance of maintaining balance sheets is underlined by the fact that companies which have taken risks with their balance sheets have taken risks with their business goodwill. The consequences faced by such companies are too sad to describe. Companies big and small, are paying handsome salaries to accountants and tax managers, so that their business doesn't turn out to be ugly, and their balance sheets remain intact. One interesting feature of Balance Sheets is that they are always changing. As you keep on earning, spending, saving and investing, your balance sheet keeps playing with the figures and still maintains a right balance with the "Assets" and the "Liabilities"! This is the art of making a balance sheet- the amount is the same- you invest it in a bank, it becomes your assets (on the left hand side); you take a property loan, it becomes your liability (on the right hand side). The figures jump from right hand to left hand side, and you get a balanced amount of your money. Let us discuss the basics for making a balance sheet, in a nutshell :- Know your Assets- The left hand side of a balance sheet lists all the assets of the company. Your assets are of two types: -
Current Assets are those assets that can easily be converted into liquid cash. This includes of course, cash, all cash equivalents like gold, jewelry and land. Non current assets are those assets that cannot be easily converted into cash. Though not easily transferable into cash, these assets depict the company's resources and play a great role in maintaining a balance sheet. The other side of the balance sheet shows liabilities, which the company is liable to pay to other parties. These are the debts and borrowings. A good balance sheet encourages you, whereas a not-so-good sheet serves as a precept to manage your finances. So be a judge of your own money and maintain a balance sheet of your company today. If you are zero in accounts, you can hire an accountant or use Online Money Management softwares that take care of all your finances. Article Source: http://www.ArticleBlast.com |
About The Author:
manageME7 is the prudent lubricant to run your financial vehicle smoothly! It provides you with the multiple currency support feature with which you can handle your financial transactions occurring in different countries.For further information visit our website to Personal Finance Software and Home Budgeting Planner
manageME7 is the prudent lubricant to run your financial vehicle smoothly! It provides you with the multiple currency support feature with which you can handle your financial transactions occurring in different countries.For further information visit our website to Personal Finance Software and Home Budgeting Planner
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