The Balance Sheet Bookkeeping Basics
At iGrow we love gardens, we like to see things flourish, think of your business’ balance sheet in terms of this beautiful strawberry plant.
The pots, soil and the plants are the assets. Items required in your business to allow it to grow and bear fruit, things like cash, debtors and equipment, without these things you do not have the fundamentals for successful results.
Loans and other funds owed by the business, do you want to grow more strawberries but only have the one pot? Borrow some funds to buy the land and you will have a debt to repay. This loan may accrue interest and fees which are tax deductible, however, without your foresight and vision of purchasing the land you cannot grow more strawberries. Hopefully your Pots, Soil and Plants are worth far more in potential income than the land debt you have incurred. Balancing these costs are the tricky part.
The fruit – all your work has paid off and you now have strawberries. The sales of your efforts can be kept as retained earnings in your business or paid out to shareholders in form of dividends. Retained earnings may also be used to pay down debt or take advantage of growth opportunities. It all depends on how many strawberries you would like in your pie.
Remember the formula Assets – Liabilities = Equity
iGrow Business Services is a Registered BAS Agent 25689866
The information/advice provided on this website is general advice only. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs.