Whether you run a global multi-corporation or a mini-store from your basement, your business needs to have accounting and that includes bookkeeping and balance sheets.
When you finish accounting all the sales, expenses, debt and everything else, the assets and liabilities need to match up. If they don’t, there is either something wrong with your accounting, or something wrong with your business.
Assets, Liabilities and Equity
Before moving further, let’s understand what assets, liabilities and equity are.
The Accounting Equation
Your balance sheet is based by THE accounting equation, which is:
Assets = Liabilities + Equity
If the left hand side and right hand side of this equation don’t match, your company finances are not in order.
Double Entry System
The double entry system is the most widely used bookkeeping system, and your assets and liabilities should match when you use it. This system basically creates two transaction accounts for a company. Money borrowed from the bank increases the cash account (asset) and in turn, the loans payable (liability) will increase.
Hence, your liabilities and assets need to match.
Why don’t your liabilities and assets match?
Here are two main reasons why this occurs.
Get Professional Help
It can be really difficult to say what’s going wrong in your accounting without taking a look at your books. Get a professional accountant to have a look at your books. The problems can stem from a simple one of bookkeeping management to a complex mistake of missing out on some liabilities and assets.
ATS Accounting provides professional help to ensure that new businesses get their accounting right.