An Expert Guide: How to Read a Balance Sheet

Comprehending how a balance sheet is read to operate a business effectively is imperative. A balance sheet gives a definite momentary picture of the company’s financial strength, displaying the asset, liability, and shareholders’ equity. 

This article will be your bookkeeping guidebook. You’ll be able to learn how to set up a balance sheet in QuickBooks Online, effectively enriching your financial knowledge and upgrading the level of your bookkeeping.

Step 1: Setting Up Your QuickBooks Online Account

The first step is to have a QuickBooks Online account in place. If you are starting in bookkeeping and desire to lay proper groundwork, you might register for a bookkeeping foundations course or a miniature business accounting course.

Step 2: Navigating to the Balance Sheet

Upon signing in, go to the ‘Reports’ tab, which is located on the left-hand side of the page. QuickBooks Online shows multiple reports. 

However, we are only interested in the balance sheet at the current stage. Under the reported period, click on ‘Balance Sheet’ to obtain the report.

https://project-management.com/the-pros-and-cons-of-using-quickbooks-online/

Alt Text: Quickbooks Online interface

Step 3: Customizing Your Balance Sheet

Since the balance sheet can be partly customized to fit a company’s needs, you can use it to your benefit. Options include the date range, whether the method of accounting is cash or accrual, and search by criteria. 

This customization is essential for the correct financial figures, which are crucial in the evaluation process.

Step 4: Understanding the Components

A balance sheet has three main components:

Assets: These are the belongings of the respective business. Assets can be cash, inventory, equipment, etc.

Liabilities: What your business has to pay to others, for example, loan receivables and credit purchases.

Equity: Stockholder’s equity is the owner’s interest in the business: total assets excluding all liabilities.

Step 5: Entering Assets

In QuickBooks Online, the grouped asset types are subdivided based on current and noncurrent assets.

On the current assets, we can classify cash, receivables, and inventory, while on the noncurrent assets, we have properties, plants, and equipment, amongst others.

To include assets, add new entries to the ‘chart of accounts’ under the accounting tab.

Step 6: Entering Liabilities

Like assets, liabilities are classified as current if due for less than one year or otherwise long-term if due for a period exceeding one year. 

Examples of this are accounts payable, loans, and mortgages. Record all your liabilities by creating new accounts in the Chart of Accounts.

Step 7: Recording Equity

Equity means whatever is left over after the business removes all of its liabilities from the firm. 

Joint equity accounts include owner’s capital, retained earnings, and common stock. They are an essential part of your business and should already be listed in your Chart of Accounts.

Step 8: Auditing the Balance Sheet

After entering all the data required for your balance sheet, go through the balance sheet. Ensure the input data is accurate and all the relevant information has been included. 

This is where your bookkeeping mentorship or online bookkeeping training can benefit you. A balance sheet audit is essential since it enables individuals to manage their accounts easily.

Step 9: Taking It a Step Further

To gain a deeper insight into the subject, the options include online business finance courses, digital bookkeeping courses, or e-learning accounting programs. 

These accounting e-courses offer an essential and rich learning approach to other accounting, financial management, and reporting courses.

Enhancing Your Bookkeeping Skills

Going through the specifications of a balance sheet and the process of inputting it into QuickBooks online are the fundamental abilities one should possess, regardless of whether they have the qualities of a business person or a bookkeeper. 

It is a formula used in different trainings such as the business financial management course and the finance management online training to master bookkeeping basics. 

It is suitable for self-enrichment or advancing one’s career; these courses provide essential information and skills regarding bookkeeping.

Key Takeaways

A balance sheet prepared to the best of your abilities is one of the most crucial ways of managing business financial statements. With this guide, you can now create and read the balance sheet in QuickBooks Online. 

Upgrade your bookkeeping knowledge through business bookkeeping courses, online bookkeeping training, and other accounting training online classes to be in the vanguard in this fast-changing environment in the field of bookkeeping.