This statement lists what you own, such as cash, receivables, inventory, and equipment. It also tracks what you owe, including loans, accounts payable, and credit card balances. The difference between the two is owners’ equity, which includes owner contributions and accumulated profits, less any draws or distributions.
The core equation is assets equals liabilities plus equity. Unlike the P&L, which covers a period of time, this report captures one point in time. Lenders review it alongside the income statement to assess debt capacity, available cash, and your stake in the business.
Negative cash or accounts receivable balances, or unexplained suspense accounts, often raise questions during reviews.
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Information only, not financial, tax, legal, or investment advice, and not an assurance engagement. Full disclaimer.