Write out a list of financial information that you require from your balance sheets. This report is critical to the effective management of your company. Using balance sheet software, the important information is accurate, reliable and at your fingertips.

Discuss your needs with your finance staff or your accounting services firm. Review the list of options available with your current accounting software tool and explore the other methods and software products available to meet your needs. Follow the three steps below to expand your knowledge of balance sheets basics.

1. Review balance sheet information.

2. Look at balance sheet analysis software.

3. Register for a balance sheet class.

Action Steps
The best contacts and resources to help you get it done

Read about balance sheets

Invest time to read about balance sheets and balance sheet analysis. The balance sheet report is one of the key financial statements used to manage any business. Reading the balance sheet correctly is critical to developing a business plan for the future and ensuring the business is a healthy, growing concern.

I recommend: Sit down with the balance sheet produced by your accounting system and go over each line to further your understanding of where money is being spent. Calculate the basic balance sheet ratios to determine the areas of weakness and strength. Read balance sheet basics from on Investopedia for more information. Find balance sheet basics books at Abe Books.

Explore balance sheet software

Investigate balance sheet software to determine what programs work best for your firm. Make a list of your requirements from balance sheet analysis software. Include the number of company balance sheet accounts, number of transactions, number of users and the types of reports that would be helpful. Review the program details with your accounting staff to assist in the selection process.

I recommend: Confirm that balance sheet software is able to meet your needs by comparing the features available to the analysis of balance sheet accounts that would normally be done manually. Discuss training sessions with your software providers on these important features. Ozgrid and The Spreadsheet Store both provide balance sheet template in excel.

Take a course in balance sheets

Improve your knowledge of balance sheet basics and analyzing balance sheets by taking a post secondary course in the balance sheet model. These courses are widely available from the local business school and cover the theory and practical applications of balance sheet analysis.

I recommend: Sign up for an accounting course in balance sheets from the Accounting Coach, which covers all the material necessary to understand balance sheet analysis and to ensure that you have the ability to correctly read and interpret the information provided. The key ratios and how this data is uses is the basis for important decision making. Morningstar offers A Tour through the Balance Sheet.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Take the time to review the balance sheet analysis reports with a fine tooth comb. There is a wealth of information there to assist in decision making.

A balance sheet, also known as a statement of financial position or statement of financial condition, is a report that shows all the items owned or controlled by a company, the ownership interest in the company, and the debts the firm has incurred. Knowing how to analyze a balance sheet is essential, whether you're considering acquiring a firm or just trying to strengthen and troubleshoot your own business.

Getting started:

1. A balance sheet follows the formula of assets = liabilities + owners' (or shareholders') equity
2. A balance sheet depicts a particular point in time, usually the last day of the quarter or fiscal year, and reflects the balances, or values, of the assets, liabilities and equity on that day.
3. A balance sheet reveals a firm's financial condition, while an income statement shows profit performance.

Action Steps
The best contacts and resources to help you get it done

Learn the basics before you begin to analyze

It's difficult to analyze a balance sheet if you're not familiar with the basic terms and concepts involved, such as accounts receivable, cash and cash equivalents, intangible assets, and liabilities.

I recommend: Check out the Motley Fool on balance sheet basics or learn more about the concepts and terms behind a balance sheet through AmeritradeFinancial.

Watch assets, liabilities and equity

A balance sheet includes a catalog of the assets of a company plus the portion of assets financed by equity and by debt. A balance sheet typically will list assets, which can include property, equipment and other assets, on the left side of the sheet. Liability and stockholder equity, which can include current liabilities, long-term liabilities and stockholders' equity, is listed on the right. The total on the left side must equal the total on the right side.

I recommend: Go to Investopedia.com for a detailed discussion of assets, liabilities and equities on a balance sheet. Learn about balance sheet structure from Wikipedia.

Calculate the ratios

There are several tools available to help calculate important ratios, including return on assets (ROA) and return on equity (ROE). These tools can be used to analyze profitability, liquidity and long-term financial strength.

I recommend: Learn the six basic tools to analyze a balance sheet, plus the six basic tools to analyze a financial statement, from the University of Florida.

Find balance sheets online

There are many places to look for a company's balance sheet, including its annual report and company information or investor relations section of its Web site.

I recommend: Check out About.com to find ways to acquire a copy of a firm's balance sheet and other financials. Search the federal government's EDGAR website or Hoovers to find a specific public company's balance sheet.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  'Balance sheet' is one of the most misused terms in business. Financial journalists and investors often use it — incorrectly — when they mean such things as a company's overall financial condition or its profitability.
• •  To best gauge a company's financial position, examine its latest balance sheet and compare it to prior balance sheets and other operating statements.
• •  Compare current assets to current liabilities to identify potential cash flow issues.
• •  The devil is in the details: Check the footnotes for revealing and crucial details vital to understanding a company's financial health.

Balance sheets are an integral part of any company's accounting records. Even if you're not involved in the daily task of balance sheet management, you're likely at least interested in what all those numbers and key terms mean on your company balance sheet. Whether you're running a large corporation or working with a small business balance sheet, these terms will generally be the same.

From defining exactly what a company balance sheet is to knowing the difference between current assets and fixed assets, learning balance sheets key terms will help you gain an understanding of the daily financial status and activity of your company. Become familiar with the following information to help you gain a basic understanding of balance sheets:

1. Define what a balance sheet is and learn balance sheets key terms, from assets to liabilities.
2. Recognize related terms that impact balance sheets.
3. View sample balance sheets to fully understand key terms at work.

Action Steps
The best contacts and resources to help you get it done

Get to know your company balance sheet

The best way to start with an introduction to balance sheets key terms is to learn exactly what a balance sheet is and what it does. In short, balance sheets are a listing of a company's liabilities and assets, but of course there's more to it than that, such as types of liabilities and assets.

I recommend: Learn what's meant by long- and short-term liabilities and assets such as checking accounts and government securities, as well as types of current assets such as accounts receivables at BusinessTown.com. Find the definition of balance sheets key terms such as owner's equity, notes payable and more at Inc.com.

Better understand balance sheets key terms by getting familiar with related financial terms

Not everything that impacts a financial balance sheet appears directly in the statement or summary, but is still figured into the numbers. Some factors concerning assets and liabilities need to be understood and applied when preparing a company balance sheet, such as short-term investments and intangibles.

I recommend: BestWaytoInvest not only provides a detailed look at balance sheets, it defines such terms as intangibles, goodwill and more. Investopedia defines the different methods of depreciation and salvage value, common terms used in reference to assets and liabilities listed on balance sheets.

Study sample balance sheets for a hands-on education in key terms

As many professionals in blue-collar trades can attest to, few things compare to hands-on training. Analyzing balance sheets can be a substantial learning experience when it comes to understanding balance sheets key terms.

I recommend: Get in-depth explanations and definitions for balance sheets key terms, access analytical tools and examine a sample balance sheet at the University of Florida IFAS Extension website. Business Owner's Toolkit provides the accounting equation used for balance sheets and shows how it is applied in a sample balance sheet for quick, easy reference.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Invest in balance sheet analysis software to help you gain a better understanding of balance sheets. Balance sheet software is a great way to understand and apply balance sheets key terms.