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Monday, 09 April 2018 20:15

Assets = Liabilities + Equity

Assets = Liabilities + Equity

At the end of the company’s reporting period, a snapshot is taken of the company’s financial health. A balance sheet allows owners to get a glimpse into the company’s financial standings. The balance sheet is one of the three primary financial statements that business owners use. It allows owners to get a glimpse into the company’s financial standings and see what the company’s financial position is. It shows what assets are owned, which liabilities are outstanding, and any equity that has been made.

Assets
Assets are the things companies own and are categorized into two categories; current and non-current assets. Current assets are defined as cash and any other asset that will be turning into cash within the company’s operating cycle. Assets are the top part of the balance sheet and will be listed in the order of liquidity. Liquidity meaning that this item can be turning into cash quickly. An example of what order current assets would appear on the balance sheet is; cash, temporary investments, accounts receivable, inventory, supplies, and prepaid expenses.

Non-current assets are not intended to be turned into cash with the company’s operating cycle and are what the company owns. They’re the fixed assets such as office equipment, building property, land, long term investments, stocks and bonds.

Liabilities
Liabilities are financial contracts that require a payment of cash for compensation. Liabilities are also categorized into two categories; current and non-current liabilities. Current (or short term) Liabilities are obligations that are to be paid within 12 months or expected to be paid off within its normal operating cycle. Some examples of current liabilities are accounts payable, wages, and rental payments.

Non-current liabilities, also known as long term liabilities are financial contracts that are not due within 12 months, or within the company’s operating cycle. They’re not expected to be liquidated anytime soon. Long-Term liabilities indicate how much the company is currently in debt vs it’s cash flow. Some examples of long term liabilities are bonds payable, long term leases, and product warranties.

Equity
Equity is what is remaining after you subtract what you own (assets) from what you owe (liabilities) and is called net worth. After all debits and obligations have been paid for any remaining values belong to the business owners, also known as owner’s equity.

Want to learn more?
Accounting can be very challenging. We find that most business owners don’t know where to get started. On Wednesday April 25, 2018 at 11:00 AM EST we will be presenting a webinar called “Tools Your Business Can't Live Without: The Only Accounting Guide You'll Need.” Content that will be covered in the webinar will include going over the principles of accounting. Our webinar will ensure that small business owners will have the tools to understand their finances. Topics that will be covered in this webinar are Introduction to Cash Flow, Income Statements and Balance Sheets.Visit the link below for more details.

CLICK HERE TO SIGN UP FOR THE WEBINAR TODAY!

Crystal Williams, Web Marketing Assistant, WebSan Solutions Inc.,a 2017 Microsoft Modern Marketing Innovation Award Winner

 

Published in WebSan Blog



Has your business grown to the point where it’s too much for you to handle your own finances? If this is the case, you must be wondering if it would be better to hire a bookkeeper or an accountant. Gaining a better understanding of both professions will help paint a better picture of who you should hire. Both positions will be responsible with managing your finances, but each one will contribute differently to the company’s accounting objectives.

Bookkeeping is more of the administrative role of the company’s accounting process but is still a key component. Daily tasks include collecting and sorting, through the receipts and invoices then inputting the required data into the general journal. The bookkeeper would have to maintain the general ledger on a constant basis and monitor the ongoing finances of the business. Additional responsibilities for the bookkeeper are but not limited to;

Recording Transactions
Processing Invoices, Receipts, Payments
Processing and Maintaining Payroll System
Reconciling Accounts and Preparing Reconciliation Reports
Managing Accounts Receivable and Accounts Payable
Calculating HST
Preparing and Lodging BAS
Tax Preparation

Bookkeeping is only half of the accounting process. An accountant helps business owners make better financial decisions. The accountant has a more of an analytical position and will create reports based on past financials performances. These reports are generated from the financial reports that the bookkeeper has created during a specific time. Their accounting certification (CPA, CGA, CMA, CA) and strong financial background makes them best suited to provide feedback and advice for the company’s future objectives. Other responsibilities of the accountant are but not limited to;

Financial Projections
Future Financial Elements
Preparing Adjusting Entries
Preparing Company Financial Statements
Analyzing Costs of Operations
Auditing
Business Establishment Assistance
Financial Management Advice
Taxation Advice and Planning

The job of the accountant relies heavily on the work of the bookkeeper, it would be beneficial to have both for your business. This will ensure that your business remains financially healthy and it will allow you to have more time to focus on growing your business. Develop your company into a paperless business with Microsoft Dynamics, download our demo today http://www.websan.com/demo/ and see how going digital can benefit your business.

Crystal Williams, Web Marketing Assistant, WebSan Solutions Inc.,a 2017 Microsoft Modern Marketing Innovation Award Winner

Published in WebSan Blog