Balance Sheet

Financial Dictionary -> Investing -> Balance Sheet

All companies need to know their gain and losses as frequently as possible. This is because it determines whether a business or a company is worth pursuing or not. Knowing if you gained more than what you lost confirms that you have earned something. However, if you have lost more than you have gained, or you have put out more money than what you have earned, it means that the business is going bankrupt.

This is where financial statements come in handy. They keep track of the company or business' assets, liabilities and owner's equity. Assets are the things that the company owns or the company's income. Liabilities however are the exact opposite of assets. They are the ones that have been spent on the business or those that have been used to keep the business alive. The owner's equity is the capital that is used to start the business. This is need to be know in order to really see if the capital has been earned back, has the possibility of being earned back or impossible to earn back at all. Financial statements contain the data needed to be compared in order for the owner to know if his company or business is actually earning something or not.

Although it may be tough to keep or make a financial statement since you have to know well every money that goes out and goes in, it is just a matter of keeping records of your transactions may it be involved with incoming or outgoing money.