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What is a Balance Sheet?

A Balance Sheet is a snapshot of your business’ financial position on a given day, usually calculated at the end of the quarter or year. It is a summary of your company’s assets, liabilities/obligations, and owner’s financial involvement. A business will generally need a Balance Sheet when applying for loans or grants, submitting taxes, or seeking investors.


Note: The Balance Sheet in your FreshBooks account is just a template, and we do recommend seeking advice from an accounting professional when creating a new one.


You can run your Profit and Loss Report by doing the following:

  1. Click on the Reports tab
  2. Click on the Accounting Reports sub-tab
  3. Click on Profit and Loss.


There are essentially 3 accounting categories used to keep track of your finances:

  1. Assets
  2. Liabilities
  3. Owners’s (aka Shareholder’s) Equity


The way your finances “balance” is as follows: Assets = Liabilities + Owner’s Equity.

Each of these categories are covered in detail below:

Balance Sheet sample.

Assets

An asset is anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value.

To a business: Assets include cash on hand (cash & money in the bank), accounts receivable, reimbursable expenses, inventory, and any equipment that is of value. In FreshBooks, your “outstanding” Invoices would be considered accounts receivable.

These items are a great starting point for the Assets section of your Balance Sheet:

  • Cash on Hand: Any money your business has direct access to. That would include all cash + money in the bank.
  • Accounts Receivable from FreshBooks: The value of your outstanding invoices as of the balance sheet date. This does not include any invoices that are still in draft status. FreshBooks will populate this value for you, but you are welcome to change it.

    The value displayed in that field is in your Base currency, but rest assured that unpaid multi-currency invoices are taken into consideration. FreshBooks uses the conversion rate from the day of the “Balance Sheet as of” date, or the closest available day, and adds up all the different currency invoices to one total accounts receivable amount. You can hover over the currency to see the breakdown.

  • Accounts Receivable from other Sources: Any outstanding money you are expecting to be paid from sources outside of FreshBooks.
  • Inventory: Goods and materials that a business holds for the ultimate purpose of resale. Inventory does not count any items that you have already sold.
  • Equipment: Any tangible items of value that you have purchased for business purposes, but that you are not selling. Check out this FAQ post for more examples.
  • Reimbursable expenses: Any expenses that you purchased that you will be reimbursed by another party. An example of this would be gas required to travel for business purposes.

Click Add or remove Assets for more options.

Liabilities

A liability is an obligation or debt of your business from past transactions or events.

To a business: Liabilities are moneys owed by the business. An example of liability is a loan for your business, accounts payable, credit cards payable, or taxes you still need to pay.

These items are a great starting point for the Liabilities section of your Balance Sheet:

  • Accounts Payable: Money that you owe to other parties for reasons other than a loan. An example of this would be a received invoice that you have not paid yet, for a service such as advertising, or electric/telephone bills.
  • Taxes Payable: Taxes that you owe the government.
  • Current Loans Payable: The value of any loans from banks/investors that you have not paid back yet.
  • Long Term Loans Payable: Any long-term loan that you have not paid off yet.
  • Credit Cards Payable: The value of your business’ unpaid credit card debt.

Click Add or remove Liabilities for more options.

Equity

Equity is the owner’s claim on the assets of a business. It represents assets that remain after deducting liabilities.

To a business: Equity is what you put in or take out of the business. Examples of equity would be opening investments, contributions, owner’s capital or retained earnings. When you re-arrange the accounting equation, Equity = Assets - Liabilities.

Owner’s Capital and Retained Earnings are a good start for the Equity section:

  • Owner’s Capital: Owner’s investment into the company plus the net income earned by the company, minus any withdrawals made by the owner. Note: The owner’s bank account and the business bank account are separate entities.
  • Retained Earnings: Net income which is retained by the corporation rather than distributed to its owners as dividends.

Click Add or remove Owner’s Equity for more options.



Why is my Balance Sheet not balancing?

In other words, Assets ≠ Liabilities + Owner’s Equity.

  • Double check your numbers and make sure they are accurate
  • Make sure that you included taxes payable as a liability (sales taxes on accrued Invoices)
  • Make sure you account for accounts receivable from sources outside of FreshBooks (if any)
  • Equity is what makes up the difference when your assets and liabilities don’t equal each other. If you have made withdrawals from your business’ account, make sure to reduce the owner’s capital value accordingly.

Why can’t my connected Accountant see my Balance Sheet?

Since this is a template for you to use, it is not accessible to your connected Accountant. You’ll need to save your Balance Sheet and manually email or share it with your Accountant outside of FreshBooks.