Understanding Your Balance Sheet
Overview
A Balance Sheet is a financial report that shows your business’s financial position at a specific point in time. It provides a snapshot of what your business owns (assets), what it owes (liabilities), and the resulting value to you (equity) on a given date.
The balance sheet follows the fundamental accounting equation:
Assets = Liabilities + Equity
This means everything your business owns is financed either by money you’ve borrowed (liabilities) or invested or earned (equity).
Why the Balance Sheet Matters for Your Business
Your Balance Sheet helps you:
Evaluate financial health: See whether your business has enough assets to cover its debts.
Make informed decisions: Understand your available resources before making purchases or investments.
Track business growth: Compare balance sheets from different dates to see how your financial position changes over time.
Prepare for tax time: Organize the financial information your accountant needs for filings.
Secure financing: Provide lenders or investors with a complete picture of your business’s financial position.
Running Your Balance Sheet Report
To generate a Balance Sheet in Quicken Business & Personal:
Go to Reports > Business Reports > Balance Sheet.
The Balance Sheet displays your current assets, liabilities, and equity as of the selected date.
Understanding Your Balance Sheet Results
Your Balance Sheet is organized into three main sections:
Assets (What You Own)
Assets appear at the top of the report, usually listed in order of liquidity—how easily they can be converted to cash:
Bank accounts: Cash in checking and savings accounts.
Accounts receivable: Amounts customers owe you for unpaid invoices.
Property and equipment: Business vehicles, furniture, computers, and other physical assets.
Other assets: Inventory, investments, or prepaid expenses.
Liabilities (What You Owe)
Liabilities appear in the middle section and represent debts or obligations your business must pay:
Accounts payable: Money owed to vendors or suppliers.
Credit cards: Outstanding business credit card balances.
Loans: Business loans, equipment financing, or lines of credit.
Other liabilities: Taxes owed, payroll obligations, or deferred revenue.
Equity (Your Ownership Value)
Equity appears at the bottom and represents what’s left after subtracting liabilities from assets—the true net worth of your business:
Owner’s equity: Funds you’ve invested in the business.
Retained earnings: Profits the business has kept instead of distributing.
Current year profit/loss: Income minus expenses for the current period.
The total equity shows your business’s net value from an accounting perspective.
What to Look for in Your Results
When reviewing your Balance Sheet, pay attention to:
Positive equity: Assets exceed liabilities, indicating financial stability.
Negative equity: Liabilities exceed assets, suggesting cash flow or debt challenges.
Asset composition: Ensure you have enough liquid assets (cash and receivables) to cover short-term obligations.
Debt levels: Evaluate whether liabilities are reasonable relative to assets and income.
💡 Tip: Reviewing multiple balance sheets over time helps you identify growth trends, borrowing patterns, and changing equity levels.
Tips for Maintaining an Accurate Balance Sheet
Categorize transactions correctly: Assign expenses, assets, and liabilities to the right categories.
Reconcile accounts regularly: Match your Quicken records to your bank and credit card statements monthly.
Record all assets: Include business property, equipment, and investments—not just cash transactions.
Track accounts receivable: Log all customer invoices so unpaid amounts appear as assets.
Review liabilities: Ensure all business loans, credit balances, and obligations are accurately recorded