Balance Sheets Then and Now
Of the variety of reports that can be generated in QuickBooks® today, the balance sheet (otherwise known as the Statement of Financial Position) is perhaps one of the best ‘snapshot’ reports available and yet least understood by users. By utilizing the balance sheet in both form and knowledge, business owners can use the balance sheet as a basis of understanding their current financial health, and a platform for making strategic decisions and future changes to the business.
What is a Balance Sheet?
The balance sheet is generated for a particular point in time, differing from other reports, such as the income statement; a balance sheet will list a particular day (As of December 31st, 2013), whereas an income statement or similar period report will reflect a span of time (For the Month of December 2013). Made of up three component categories (Assets, Liabilities and Equity/Capital) with subsequent sub-categories as appropriate, the balance sheet follows a simple formula in portraying values: Assets = Liabilities + Owner’s Equity. These titles correspond to what is owned and owed by the company and the net worth after accounting for the prior items.
The first recorded use of the balance sheet spans back to the 1200’s A.D., when Venetian merchants utilized a record-keeping system of their assets and liabilities in the midst of trading between European and Asian kingdoms. The theory of portraying static values while also communicating the dynamic changes in the financials were developed in the late 1800’s by Alexander Roudanovsky, who combined French, Italian and German theories of accounting into one functional theory; this theory developed throughout the 1900’s to the format we use today.
Creating a Balance Sheet in QuickBooks®
Generating basic reports in QuickBooks® requires only rudimentary knowledge to the location and format of the report; analyzing and using a balance sheet to its highest ability, however, demands time and understanding in choosing customized formats and appropriate outlining characteristics for the report. To generate a balance sheet that shows only categorical totals, choose Reports from the tool bar, then Company & Financial > Balance Sheet: Standard. The date can be changed from the fill bar at the top of the report screen to reflect the desired snapshot.
A Balance Sheet: Detail report (generated from choosing Reports > Company & Financial > Balance Sheet: Detail) will show all corresponding transactions for the date range provided, and end with a summary total for each category. This type of balance sheet report is useful when analyzing the types of transactions that run through each account on the balance sheet, e.g. changes to fixed assets through purchases, sales or monthly depreciation.
QuickBooks® also allows the user to customize reports to fit their particular needs. If a real estate company wants to breakdown the balance sheet effect by each property class, for instance, a Balance Sheet by Class can be generated by changing the Columns option to ‘Class’ in the toolbar of the report screen.