A balance sheet is a snapshot of a company’s financial position at a specific point in time. It summarizes assets, liabilities, and equity, providing valuable insights into a business’s financial health. Here are three practical examples to illustrate how balance sheets can vary based on the nature of different small businesses.
In this scenario, consider a small retail clothing store named Fashion Hub. This balance sheet is useful for understanding the store’s financial standing at the end of the fiscal year.
Context: Fashion Hub needs to assess its financial health to apply for a loan for expansion.
Balance Sheet (as of December 31, 2023):
| Assets | Amount ($) |
|---|---|
| Current Assets | |
| Cash | 25,000 |
| Inventory | 40,000 |
| Accounts Receivable | 15,000 |
| Total Current Assets | 80,000 |
| Fixed Assets | |
| Equipment | 10,000 |
| Leasehold Improvements | 5,000 |
| Total Fixed Assets | 15,000 |
| Total Assets | 95,000 |
| Liabilities | Amount ($) |
| Current Liabilities | |
| Accounts Payable | 10,000 |
| Short-term Loans | 5,000 |
| Total Current Liabilities | 15,000 |
| Long-term Liabilities | |
| Long-term Loan | 20,000 |
| Total Liabilities | 35,000 |
| Equity | |
| Owner’s Equity | 60,000 |
| Total Liabilities & Equity | 95,000 |
Notes: This balance sheet illustrates a healthy equity position, indicating that Fashion Hub can support growth initiatives through additional financing.
Consider a freelance graphic designer, Alex, who operates a small design studio. This balance sheet helps Alex evaluate personal financial stability.
Context: Alex wants to track financial performance and prepare for potential investments in new design software.
Balance Sheet (as of December 31, 2023):
| Assets | Amount ($) |
|---|---|
| Current Assets | |
| Cash | 8,000 |
| Accounts Receivable | 2,000 |
| Total Current Assets | 10,000 |
| Fixed Assets | |
| Computer Equipment | 3,000 |
| Office Furniture | 1,500 |
| Total Fixed Assets | 4,500 |
| Total Assets | 14,500 |
| Liabilities | Amount ($) |
| Current Liabilities | |
| Accounts Payable | 1,500 |
| Total Current Liabilities | 1,500 |
| Equity | |
| Owner’s Equity | 13,000 |
| Total Liabilities & Equity | 14,500 |
Notes: This balance sheet reflects a strong equity position for Alex, signifying a solid financial foundation before making further investments.
This example showcases a small coffee shop, Brewed Awakenings, and serves as a tool for financial analysis and operational decisions.
Context: Brewed Awakenings is planning to open a new location and needs to present financial data to potential investors.
Balance Sheet (as of December 31, 2023):
| Assets | Amount ($) |
|---|---|
| Current Assets | |
| Cash | 12,000 |
| Inventory | 5,000 |
| Accounts Receivable | 3,000 |
| Total Current Assets | 20,000 |
| Fixed Assets | |
| Equipment and Machinery | 25,000 |
| Leasehold Improvements | 8,000 |
| Total Fixed Assets | 33,000 |
| Total Assets | 53,000 |
| Liabilities | Amount ($) |
| Current Liabilities | |
| Accounts Payable | 4,000 |
| Short-term Loan | 6,000 |
| Total Current Liabilities | 10,000 |
| Long-term Liabilities | |
| Long-term Loan | 15,000 |
| Total Liabilities | 25,000 |
| Equity | |
| Owner’s Equity | 28,000 |
| Total Liabilities & Equity | 53,000 |
Notes: The balance sheet indicates that Brewed Awakenings has a manageable level of liabilities compared to its equity, making it an attractive option for investors.