FEATURE sTORY Dissecting the Balance Sheet By Michael K. Farmer, CPA M any business people only look at their profit and loss report when reviewing their financials. They may be missing some important information that is delineated on the balance sheet. Below is a sample balance sheet with items that should be reviewed to ensure the financial health of any company. It is also helpful to have a comparative balance sheet showing the current and last periods. This will help identify items that are growing or declining. growth in gross fixed assets indicates equipment replacement and additional investment in the company. member draws should not be greater than the sum of retained earnings plus net earnings. Please see my article that was published in the November/December issue of Billing on financial reports. Michael K. Farmer has been a CPA working with medical clients since 1997. He helps his clients with their accounting, tax, and business needs. In 2010, he earned his healthcare business consultant certification. Michael resides in Muskegon, Michigan, where he is a partner in a CPA firm. THe jOuRnal OF THe HealTHCaRe BIllIng anD managemenT assOCIaTIOn 31 xyZ Company Balance Sheet December 31, 2013 ASSETS Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,687 accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . $89,586 Total Current assets. . . . . . . . . . . . . . . . . . . . . $105,273 Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $168,658 accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . ($159,321) net Fixed assets . . . . . . . . . . . . . . . . . . . . . . . $9,337 notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $139,610 LIABILITIES AND EQUITy accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,257 Payroll Taxes Payables . . . . . . . . . . . . . . . . . . . . . . . . . . $4,561 Credit Card Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,381 Total Current liabilities . . . . . . . . . . . . . . . . . . $23,199 notes Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105,631 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $128,830 Paid in Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000 member Draws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(15,000) Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,685 net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,095 Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,780 ToTAL LIABILITIES & EQUITy . . . . . . . . . . . . . . . . . . . . $139,610 Cash should be positive. accounts receivable should not increase unless sales are growing. any notes receivable should be documented with a bona fide loan agreement. These amounts should not be growing. They represent unpaid bills. If this is growing, you may be late on payroll taxes, which can lead to problems. If current assets are not greater than current liabilities, you may have problems paying your bills. net earnings represents your net income for the year.
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