Balance sheet
A balance sheet is a report of a company’s financial position and one that provides insight into what the organization owns, owes and has invested by shareholders. It is a statement that summarises the assets, liabilities and shareholders’ equity at any given time, thus offering an overview of the company’s overall financial wellbeing.
A Scenario : Importance of a Balance Sheet
John has owned a retail store that specializes in outdoor gear for 5 years, and is an adept record-keeper and financial statement maintainer. Despite the proficiency, John is finding it difficult to handle both operational and financial aspects of his business.
John was astonished when he received a notification from the IRS (US Income Tax Agency) stating that his business would be audited for the previous two years. This was an unnerving situation, as he had no idea what it entailed & what repercussions it might bring. He opted to source help and employed an esteemed accounting firm to aid him through this daunting audit process.
Professionals from the accounting firm visit the store in order to go through a thorough audit. They review all financial documents, income, expenses and statements for the past two years. The auditors also hold interviews with staff to ensure accuracy of collected data.
John goes through an extensive audit process that lasts for weeks – he answers questions & provides related documents so the auditors can properly assess his records. The final review shows that everything is correct and he has been paying his taxes in full.
John is pleased that the audit is over and thankful for the support given by the accounting firm. He follows up on auditors’ suggestions and has a better understanding of how to look after his business financially.
In this scenario, an audit was conducted to review John’s business financial records and statements, and ensure compliance with tax regulations. The process was carried out by a team of experienced auditors, and the outcome was a positive one, with the company being found to be in compliance with tax regulations.
