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Balance sheets can also be projected into the future, and the projections can serve as targets to aim for or benchmarks to compare against actual results. If your accounts receivable go up or inventory increases, your balance sheet reflects this.And, of course, increases in cash show up on the balance sheet. offer an in-depth understanding of what’s essential to any business plan, what’s appropriate for your venture, and what it takes to ensure success.
Actually, accountants put it differently and, of course, use different names. The things you owe money on are called liabilities. A balance sheet shows your condition on a given date, usually the end of your fiscal year. That is, next to the figures for the end of the most recent year, you place the entries for the end of the prior period.
Income statements are called various names—profit and loss statement (P&L) and earnings statement are two common alternatives.
They can get pretty complicated in their attempt to capture sources of income, such as interest, and expenses, such as depreciation.
When you subtract liabilities from assets, what’s left is the value of the equity in the business owned by you and any partners.
Tracking changes in this number will tell you whether you’re getting richer or poorer.