Personal Business Journal

A balance sheet is a quick picture of the financial condition of a business at a specific period in time.

The activities of a business fall into two separate groups that are reported by an accountant. They are profit-making activities, which includes sales and expenses. This can also be referred to as operating activities.

There are also financing and investing activities that include securing money from debt and equity sources of capital, returning capital to these sources, making distributions from profit to the owners, making investments in assets and eventually disposing of the assets.

Profit making activities are reported in the income statement; financing and investing activities are found in the statement of cash flows. In other words, two different financial statements are prepared for the two different types of transactions.

The statement of cash flows also reports the cash increase or decrease from profit during the year as opposed to the amount of profit that is reported in the income statement.

The balance sheet is different from the income and cash flow statements which report, as it says, income of cash and outgoing cash.

The balance sheet represents the balances, or amounts, or a company’s assets, liabilities and owners’ equity at an instant in time.

The word balance has different meanings at different times. As it’s used in the term balance sheet, it refers to the balance of the two opposite sides of a business, total assets on one side, and total liabilities on the other.

However, the balance of an account, such as the asset, liability, revenue and expense accounts, refers to the amount in the account after recording increases and decreases in the account, just like the balance in your checking account.

Accountants can prepare a balance sheet any time that a manager requests it. But they’re generally prepared at the end of each month, quarter and year. It’s always prepared at the close of business on the last day of the profit period.

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It will take you on average between 25 to 30 years to pay off your credit card at the minimal amount. This will not do.

Make a list of all of your credit cards (including all consumer debt such as doctor bills, furniture stores and your home).

List the following in columns: the type of credit card, principle amount, regular payment amount, power down payment, interest rate, total number of payments left on the card, estimated payoff date. Put your list in order of how many payments are left from least to most. If you make a minimum payment of $55/month on one of your cards until it is paid off in full, you then have $55/month freed up to add to the minimum monthly payment for the next credit card. After you pay off the second card, the amount you were paying on that one can be applied toward the third card. By doing this, you will decrease the number of years required to pay off your credit cards from approximately 30 years to nine years.

Using this strategy, think about the other ways you can free up money. If you spend about $100 at Starbucks each month, think about spending that money toward your credit card payments.

Remember, money is emotional. We spend and make money based on emotional compulsion. Go back and see what you spent money on in the last week and how much you spent. It’s not how much money you make that matters, but how well you manage it that counts.

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