August 19, 2021 Accounting, Money, Plan

Balance Sheet 101

When it comes to wealth building, the Balance Sheet is King! This is where we track the Assets, Liabilities, and Equity of your wealth.

In my experience, this is the least understood document in financial reporting. So, the following is Balance Sheet 101.

Date: This document is always a footprint at a particular moment in time.  Keeping it current allows you to track your progress.  Reviewing this document monthly keeps you moving in the right direction.  What we focus on grows!

Assets: Things that put money in your pocket.

Bank / Cash: These are liquid and accessible at any moment.  Typically this will be the first place you begin to accumulate wealth.   Paying yourself first means moving a portion of your cash into its own account to accumulate. This is a disciplined habit and the good news about that is you can start right now! As this cash accumulates you will move it into current assets, so it can go to work for you for the long term.

Fixed Assets: These are things you purchase with your cash. Things that will typically have a life of more than one year. These are things like your home, your car, office equipment. Typically these things will diminish in value over time and we reflect that with depreciation.  For tax purposes this can be a very good thing – we will cover that in Balance Sheet 202.

Current  Assets: These are the places you move your cash to so they will go to work for you. Places such as investments. There are many types of investments – we will cover that in Balance Sheet 202. Typically these things could be converted to cash easily.

Other Assets: These are also places you move your cash to go to work for you, however, they will have a longer conversion time. This could be things like Notes Receivable or loans to business’.

Liabilities: Things that take money out of your pocket.  

Loans: These are when you use other people’s money. Typically these are Long Term and have a repayment schedule longer than one year. There are strategies when this is a good idea – we will cover that in Balance Sheet 202.  

Credit Cards: This is another form of using other people’s money.  When you carry a balance on your card it must be reported here.

Current Liabilities: These are Short Term Liabilities and represent things like Payroll Taxes due or Sales Tax due. If you carry vendor balances they show here. Typically these are due within a specific time frame of less than one year.

Equity: This is where your wealth is tracked.  

Capital Paid In: If your books are for a business, here is where you record the initial investment in stock and/or cash that the owners paid in. In other words, “your skin in the game”.  There are strategies as to when you would want to see a significant number here.

Opening  Balance Equity: If your books are for your personal accounting this is where you establish your current net worth when you start tracking your wealth.

Retained Earnings: This is where your net income and or losses will accumulate year after year. It is another place where your wealth is tracked. We will pull this account apart more in Balance Sheet 202.

What makes this report meaningful is your goals. You will have goals of how you want to live, experiences you want to have, the ways you want your business to operate, and each will have a strategy for making it happen. All strategies require an investment of time, energy, and money. The money piece can be created in many ways, both with active and passive income sources. Your balance sheet is where the picture gets painted for this.

We are here to help if creating a balance sheet of wealth is on your radar! Send us an email if you are ready to connect. 

In Abundance,



Your email address will not be published. Required fields are marked *