Balance sheet

A balance sheet is like a snapshot of everything your business owns and everything it owes, as of a specific date. It includes the company’s assets (what it owns), its liabilities (what it owes), and the portion that belongs to the owners (equity, which is assets minus liabilities).

At a glance

A snapshot of what the business owns and owes as of a specific date
Three components: assets (what we own), liabilities (what we owe), and equity (what remains for the owners)
Simple rule: assets = liabilities + equity (everything balances out)
The bank looks at this before lending you money
Equity grows when a company retains its profits: this is the accumulated retained earnings over the years

Why it matters

Imagine you’re selling your business tomorrow: the buyer would first want to see what the business owns and what it owes. That’s exactly what the balance sheet shows. Real-world example: A business has $150,000 in assets and owes $90,000, so it has $60,000 left over that belongs to the owners. A large portion of that $60,000 often comes from retained earnings, the profits retained by the company. The balance sheet answers a different question than the income statement : One tells you what you’re worth on a specific date; the other shows whether you’ve made money over a period of time. By comparing your assets and short-term liabilities, we can also determine your working capital. A company must also attach its balance sheet to its tax return, in the standardized format required by the Canada Revenue Agency. A solid balance sheet (low debt, strong assets) reassures banks and increases resale value. Bankeo connects you, for free, with a vetted accountant or CPA who will prepare it according to industry standards and help you strengthen it, and we’ll stay by your side every step of the way.

Frequently asked questions

What exactly is a balance sheet?

It’s a snapshot, taken on a specific date, of everything your business owns (assets) and everything it owes (liabilities). The difference between the two is what belongs to the owners (equity).

Why does the bank look at my balance sheet?

To see if you’ll be able to repay the loan before borrowing money. A balance sheet with low debt and strong assets shows that your business is sound, which improves your chances of getting a loan.

Who can help me prepare my balance sheet?

An accountant prepares it according to the rules and explains what it shows. Bankeo connects you with a verified accountant or CPA for free, at no cost to you, often within 48 hours, and we’re here to support you every step of the way.