Answers · Bookkeeping
How to Read a Business Balance Sheet
A balance sheet reports assets, liabilities and equity at a specific date; Assets = Liabilities + Equity.
How it works
The rule, and what it turns on.
It often exposes bookkeeping problems hidden by a reasonable-looking P&L, including unreconciled cash, stale receivables, wrong loans and unexplained equity.
Example
Cash $50,000 plus equipment $200,000 equals assets $250,000; loans $120,000 plus equity $130,000 equals $250,000.
Common mistakes
What we see go wrong, and what we do instead.
- Reviewing only the P&L.
- Letting loan balances remain unchanged for years.
A better approach
- Reconcile every material balance-sheet account at year-end.
Authority
Where this comes from, so you can check it.
IRC §6001; Treas. Reg. §1.6001-1; IRS Publication 583; IRS Small Business Recordkeeping guidance.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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