Ultimately, the balance sheet is all about balancing what you own (assets) with what you owe (liabilities and shareholder/owner equity). A well-prepared balance sheet provides a snapshot of your company’s financial standing. It can help you determine your competitive position, identify potential issues and keep track of your company’s performance over time.

The assets section of a balance sheet lists all the things your company owns with a dollar value. These include everything from cash and cash equivalents, which includes the amounts in your business’s checking and instant-access deposit accounts, petty cash and any checks that have been received but not yet deposited, to inventory, which is the total market price of all your products, plus raw materials and work in progress. The items listed in the asset section are categorized based on their level of liquidity, with more liquid line items like current assets (such as cash and the contents of your petty cash) going first, followed by non-current assets that will be needed for at least one year or more, such as inventory and fixed assets (including buildings, machinery and equipment).

On the opposite side of the equation is a list of all the money your practice owes to others. These are the liabilities on a balance sheet, and they’re listed in order of their due date, starting with current liabilities, which include payments that will be made within a year of the date of the balance sheet, such as credit-card debt, wages and taxes. The next column is long-term liabilities, which are expenses that will be paid out over a period of more than a year, such as the principal and interest on corporate bonds and mortgage payments. The final category is Shareholder/Owner’s Equity, which represents the amount of money that investors have invested in your business or have been re-invested into it through retained earnings. Bilanz