When it comes to your business’ Balance Sheet, I say no! The more historical data that you have easy access to, the better off you will be.

Here are a few changes that you may want to make to your current Balance Sheet:

  • Instead of rolling equity taken from the business into one Draws or Distributions/Dividends account, set up files separately for each year.
  • Name the annual file for the year: 2010, 2011, 2012, etc.
  • Within that file include Draws or Distributions and SEP or 401K along with any other ways that you compensation yourself, like a HSA.

This works great for all types of businesses! These changes can be made easily through adjusting journal entries. What this will provide is a historical record of how much compensation owners took each year from various methods. It shows if compensation is equal partnerships. It will reflect how compensation has changed (hopefully grown!) from year to year. If you think you’ll ever sell the business, this is valuable information that a prospective buyer is going to want to see.

If you want a sample Balance Sheet, contact Carolyn@TheAccountantsOffice.biz.

About the Author

Leave a Reply

Your email address will not be published. Required fields are marked *