It shows each category of the assets owned, such as:
· accounts receivable
It also shows each category of liabilities involved, such as:
· accounts payable
· payroll tax liabilities
· loans payable
The Balance Sheet can helps answer the questions:
· Where did the profit go?
· Did cash increase?
· Did loans decrease?
· Did the owner draw funds out of the business?
· Was cash used for fixed assets?
The balance sheet allows us to understand basic things about a business. Comparing balance sheet year-to-year shows the financial structure and stability of the business.