 zero accounting software balance sheet report overview get ready to be an office hero with zero support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page we also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it here we are in our custom zero home page we set up in a prior presentation scrolling in a bit holding control up on the scroll wheel currently at 175% zoom in we're gonna open the demo file but do so by hitting the reset button which will reset the data and open the demo we're gonna open two tabs that will put our reports in the major financial statement reports the balance sheet the income statement right after hiding this item right click the tab up top duplicate right click the duplicated tab and duplicate it again we're gonna go to the tab to the middle accounting drop down and open up the balance sheet standard tab to the right as that is still thinking accounting drop down this time the income statement profit and loss P and L back to the tab to the left we're gonna change the date up top and bring that custom date up to 2022 and the end of the period that's still 2021 hold on there we have it and update the report now our focus this time that's what we've been doing every time that's our setup process our major focus now is gonna be the balance sheet now this will be more of an accounting kind of presentation here and I think it's useful to do that because noting that the balance sheet and the income statement our our our end result that's what we're trying to build at least from a reporting standpoint and so it's a good idea then to get an idea of what the balance sheet is you know what the income statement is and then we can expand as we enter more data to the other subsidiary reports which are usually giving more data about one or multiple line items on these major two financial statement reports so just a quick recap on that if I go to the first tab over here I'm gonna go to the accounting drop down and scroll down to the chart of accounts you'll recall that the chart of accounts from a prior presentation is basically the first underlying thing we set up this is gonna be one of the primary underlying foundational steps that need to happen before we can enter financial transactions then we enter the financial transactions and these are gonna track the bills the invoice and so on these things create a journal entry most of them to at least two accounts and those that'll be the double entry accounting system will then be impacting the balance sheet and the income statement are the major two forms and then all other reports are could or may also be impacted by those financial transactions but they're really given more detail about one or multiple line items on these two main reports okay so what is the balance sheet first note that the balance sheet is as of a point in time so we're reporting the balance sheet as of a point in time so if I was to change the beginning date if it wasn't for the year ended but the month ended or for the day ended it wouldn't matter because it's for this point in time it's kind of like checking your bank account as of now it doesn't matter if I change the beginning date I'm checking my bank account as of today and one year prior to that well it doesn't matter if you're checking it as of today how much is in there as of now it is what it is and the income statement on the other hand is the performance report where we actually scroll back to performance so you can think of it more like a movie what happened from a time frame to a time frame you can also think about it in terms of like how many how far can you drive in a day if you were trying to see how far you could drive in a day you reset the odometer and you just drive for a day to see how far you go those are what the income statement accounts are kind of doing and that's why you have a different title up top here saying for the year ended as opposed to the balance sheet which is just a date as of that date so the major components of the balance sheet then you could break them out into the three categories which is the accounting equation assets liabilities and the equity so and you could see this sometimes if i go to this layout tab down here you could see these major categories with with the drop downs actually i have the drop downs more here so i can collapse some of these is what i was thinking and so now you've got assets equal liabilities and equity that's the accounting equation the assets represent what the company has if the company has them they're kind of you can also think of them as investments because those are the things that the company is using in order to generate future revenue in order to generate the potential the activity into the future if we don't need to generate revenue in the future with these assets if they're not useful to increasing performance then we could just give them to the owner and the owner can invest them someplace else right the reason they're in the business is because they are there in order to help generate revenue in the future liabilities then you could think of it as a third party claim to the assets so like a bank alone whereas the equity represents the owner's claim to the assets so and so you can kind of think of the net value of the company like if you're looking at your bank account you look at the bottom line how much do i have at this point in time the bottom line is in essence the equity section because the assets what the company has minus the liabilities who we owe money to is the net value of the company although it's on a book based method as opposed to the fair market value because if i was to liquidate the company we may not be able to get the same amount of cash as we're reporting stuff up top we'll get into that in a bit more detail shortly but note also you can think of it as two sides of one coin right you've got the assets up top represent what the company has on the flip side you're showing who has claim to those assets who has claimed to the assets the third party liabilities and equity so if i look at this from an account from a from the numbers if i update i'm just going to cancel this and then say discard changes so and we'll get into that that formatting later that's a really neat tool that zero has but we'll go down here so it's 11 971 67 matches the 11 971 67 and if i pulled out the trustee calculator calculator and we're going to say a calculation of assets minus liabilities we could say assets are 11 971 67 minus the liabilities of the 22024.53 gives us the equity 10 05 to 60 86 got a little backwards there no problem okay so that's the general that's the general idea of it so let's go through the the components of it now now note that when you enter the chart of accounts every time we add a new account you are going to add them as assets liabilities equity type of accounts or expense and revenue accounts as we can see in the chart of accounts up top and then within those categories let's just go into the assets here that they got this neat thing in zero where you could go over here to just the asset accounts and then we have the sub accounts within the asset accounts now we talked about this a little bit when we went over the gl note that there's some kind of sub categories on the types of accounts that are there because of reporting purposes because that's how you normally report financial accounts and some are there because of the needs of the logistics of the software so for example the checking account and saving account are bank type of accounts they are not bank type of accounts because because of reporting purposes they're bank type of accounts because they have a special need within the software of being connected to the bank but there's still really current asset accounts for reporting purposes accounts receivable often has kind of a special need in that it has a sub ledger but notice it's a current asset type of account current asset type of account inventory is another one which is basically a current asset type of account but has a special need within the software of tracking the inventory if you're turning on perpetual inventory system and then these ones the fixed assets are actually they might have some special needs as well but they are also different from reporting purposes so let's consider that over here I'm going to then I'm going to go back to this view so I could do some collapsing edit layout view and so and this is a really neat tool this edit layout thing so that we can we will talk about it more later but I'm going to collapse everything in here okay so then the types of assets then you've got the current assets typically fixed assets and long-term assets so the current assets represent things that are going to be consumed relatively shortly like within a year so their assets they're going to be used relatively soon it's important to break those out because you want to be able to compare them to say current liabilities down here it's current liabilities versus long-term let's break that out I'll do that okay and then fixed assets represent things that were and they're basically investments that's the stuff that we took our money and put into a long-term investment in things like property plants and equipment you might hear them called depreciable assets or fixed assets depreciable assets property plants and equipment so the it's important to break those out because you have to account for them differently with depreciation schedules this is an accrual kind of account and because you want to be able to compare your current assets to your current liabilities because if I have a lot of fixed assets note my whole goal for a startup is to usually get cash and I want to get the cash so I can buy fixed assets like property planting equipment because the fixed assets are the things I can use to generate revenue in the future however if I put too much money into the fixed assets like I put I buy the farm but all my money is in the form and I have no cash flow then I will not be able to pay the upcoming bills without selling the farm right and that's not good so we got to be able to to tie both of these things out even though they're they're going to increase our total assets we have to be able to make sure we manage the flow versus our investments and then we've got the long-term assets which would be other types of assets that are not current and not fixed assets the long-term assets possibly investments for example in long-term stocks and bonds or other kind of investments that are long-term and then down here we got the liabilities so liabilities are things like loans to the bank and stuff like that which we could have a current liability and long-term liability similar kind of rationale if with the assets up top the law the current liabilities are going to be due within a year the reason that's important is because I want to make sure I have the cash flow current assets in order to pay off the current liabilities within that short-term time horizon and so and one of the if I can't and I need to finance the business one of the options is to try to push out some of my loans to long-term loans so that some more of the portion of the loan is going to be due further out into the future although that will cost us and the terms of interest and then the equity represents our claim to the business the equity is often the most common or most confusing section in some ways because I would think about it in terms of you have total equity which which represents the owner's claim to the assets that's a pretty clear because you want to think about the business being separate liability claims to the assets versus the owner's claims now if there's just one person then that's not really too difficult because now you just got one person on the equity and you're just going to break out an equity account for the owner you could call it owner's equity you can call it you know capital owner's capital and then you might break out the draws that the owner takes out so when the company generates revenue cash will go up that excess cash we're going to pull out instead of buying more fixed assets in order to pay for the personal things on the the owner's side of things and then the they might put money in which might be an owner contribution in order to grow the business or start up the business now if it's a partnership it gets way more confusing because now you have the equity as total owners still but you might have multiple partners two or more partners where you have to track each one of those individual capital accounts for them because they have differing amounts of a claim to the assets so now you've got to track which owners have what claim to the assets which can get confusing because it might not all be even because they might have an uneven share of profits and investment and so on in accordance with the partnership agreement and then for taxes it could be even different with their basis for taxes and whatnot so it gets somewhat confusing to break out between the partners but that's the partnership and then the common stock I mean the corporation is actually a little bit easier to be breaking out than a partnership in some cases because the point of the corporation is to say okay equity represents the owner's claim the owners claim are now just stockholders and we're going to say who owns what of the company not by trying to track each individual stockholders on the financial statement but by issuing shares that represent equal ownership in the corporation so now you could just say okay I'm just going to put everything in equity into in essence retained earnings would be the earnings that have been retained through the company generally and then when I give out a draw I'm not going to have to determine which partner I give to draw to I have to determine how much draws I'm going to give in total per share and then instead of draws it would be called dividends and then the and then the common stock represents the investment from the owners meaning how much did the owners pay for the initial investment by purchasing the stocks directly from the company as opposed to buying and selling them outside the company which doesn't have an impact a financial transaction impact for the company itself okay so that's the general layout of the balance sheet let's just go through the open them up a little bit more here and take a look at some individual accounts to a bit more like we did with the equity so under under the current assets you've got the cash and cash equivalents so and then you've got you've got current assets include accounts receivable inventory prepayments total current assets so oftentimes if you're adding accounts to assets it's usually oftentimes going to be in the current asset category if it's not a fixed asset the fixed assets will typically be like a building's equipment and so on now the categories for fixed assets like computer equipment you want to be careful with how you're going to be tracking and depreciating are you depreciating these things within the company or within a zero or are you going to use other software like tax software to help you with depreciation oftentimes small businesses will use tax software and their tax preparers to help them calculate the depreciation because the tax depreciation has to be calculated anyways so you might use the tax software as like your sub ledger for depreciation and your fixed assets and if so you would probably want to group your asset accounts to align with the reports given in the tax software in terms of the grouping like equipment building and so on so we'll talk more about that as we enter data into the system long-term assets you usually don't have a lot of them but you might have investments that you don't plan on on dipping into that you put in the long-term instead of current and then the liabilities most of your liabilities are probably current like accounts payable accruals and and so on payroll liabilities payables and whatnot sales tax liabilities and but you might have some long-term liabilities those tend to be usually like loans or bonds for a corporation and then we've gone over the equity so i'm gonna then uh cancel out of this and so we're gonna say cancel that let's cancel discard changes there we go okay so there's the general idea on the balance sheet and uh so so every time you enter a transaction up top you kind of want to be thinking what's the impact on the major financial statements which should include you know one of these balance sheet items and then the income statement items which we'll talk about in the future you also want to be thinking about reports in terms of are they reporting stuff as of a point in time or are they more like the income statement reporting stuff uh for a time frame has been a beginning and an end representing performance now we're later we're going to get into the formatting of the balance sheet you got some neat tools in zero and some of them are more advanced than other software like a like a quick book so you can do some some good stuff with them so we'll check those out in future presentations