Understanding Balance Sheet Account Types

To see how a company's doing financially, most people focus on its profit and loss statement (P&L), but financial professionals also pay very close attention to a firms balance sheet, too.

That's because the balance sheet is a highly efficient way to learn what kind of financial condition a business is in, and what kind of financial stewardship has been practiced since the company began. So bankers and investors analyze it thoroughly before making lending or investing decisions.

In this video, the author, an experienced small business CFO and financial expert, introduces you to the basic structure of a balance sheet.

With enough practice, you can use the balance sheet as a tool to improve cash flow and profitability, reduce financial risk, attract debt or equity capital, and ultimately increase the resale value of a business.

You'll learn about:

1. Asset accounts (what a company owns)
2. Liability accounts (what a company owes to outsiders)
3. Equity accounts (whats left over for the owners!)
4. What the word balance in balance sheet means. What does it mean when someone says the books are balanced?
5. Current vs. long-term assets and liabilities

This video is part of our Balance Sheet 101 series. Its intended for bookkeepers and business owners who want a basic introduction to this important financial statement so they can better manage the company(ies) they work for and/or own. It assumes little or no knowledge about financial statements.

The author uses QuickBooks 2009 Accountants Edition and Microsoft Excel 2009.

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Copyright 2009 David Stern CFO. All rights reserved.

Category:

Education

Tags:

• QuickBooks
• Excel
• Accounting
• bookkeeping
• Small Business
• finance
• balance
• sheet

[BlogFromItaly]

Good clear explanation - useful video. Will use this video for English classes for budding accountants and others. Thanks :)

[Overtino]

Very helpful and clearly explained. Thank you.

[VikingDude81]

Thank you David!

[Roxieanne1]

That makes so much sense! Have you done a cash flow video yet? I'll check and see. If not, that would be greatly appreciated. Thank you. You made it so simple!!!!

[trilogy1421]

magnificent video thanks so much.... hope i get an A tomorrow on my accounting test... :)

[fce]

Great Video. That really helped clarify my understanding of the balance sheet. Thanks.