Accounts that affect the Balance Sheet
Accounts That Affect the Balance Sheet
Assets & Liabilities Report, can also be referred to as a Balance Sheet or a statement of Net Worth.
A balance sheet shows a business' financial health at a single point in time.
The balance sheet lets you know exactly what things of value a company controls (assets) and who owns those assets: someone else (liabilities) or the business owner (owner's equity), ie. what the company owns and owes.
ASSETS = LIABILITIES + OWNERS' EQUITY i.e. whatever assets aren't being used to pay off the liabilities belongs to the owners.
Assets - is anything of value your business owns or controls and for which money was paid
Liabilities - are those amounts that a business owes to other people, businesses and government agencies
Owners' Equity - are the amounts that owner's, partners or shareholders have paid into the business in the form of investment or have reinvested in the business by leaving profits inside the company
Chart of Accounts
Click on the Chart icon on the the toolbar
A chart of accounts is a listing of the names of the accounts that a company has identified and made available for recording transactions
The chart of accounts are divided into sections:
Income and Expenses - these accounts that appear in the Profit and Loss Statement
Banks, Asset, Liabilities and Equity - these accounts appear in the Balance Sheet
Note: There are some Other Income and Other Expense accounts that do affect the Balance SheetPurchase of an Asset
When your business purchases an asset, you must record the purchase in your accounting records and report the effect of the transaction on your balance sheet. The accounts that an asset purchase affects in your records and on your balance sheet depends on how you finance the purchase. i.e. The purchase of an asset must be recorded as an expense to the business but must also be added as a new asset with a dollar value
Thus, as part of your Chart of Accounts setup, you must have:
Sale/Disposal of an Asset
When your business sells or disposes of an asset, you must record the sale in your accounting records and report the effect of the transaction on your balance sheet i.e. the sale/disposal of an asset must be recorded as income to the business and the asset with its current book dollar value, that is, the original cost less accumulated depreciation must be removed from the balance sheet
Thus, as part of your Chart of Accounts setup, you must have:
Loans and Repayments
When your business borrows money in the form of a loan, you must record the loan and any repayments or further draw downs i.e. The money received must be recorded as income. The loan itself must be recorded as a liability to the business. Any repayments must be recorded as an expense. Any further increases (draw-downs) in the loan must be recorded as income
Thus, as part of your Chart of Accounts setup, you must have:
an income (Other Income/11. Non-reportable Receipts) account to record the initial loan amount and/or further increases in the loan amount (eg. Motor Vehicle Loan-Received) which is linked to an Liability Account (e.g. Motor Vehicle Loan Account) using the Balance Sheet Link option.; and
an expense (Other Expense/10. Non-reportable Payments) account to record any loan repayments (e.g. Motor Vehicle Loan-Repayments) which is linked to the same Liability Account using the Balance Sheet Link option.
Article ID 1563