The balance sheet is an essential financial report for businesses. You can find out three fundamental elements in the balance sheet: assets, liabilities, and equity. The basic rule is that asset plus liability needs to be equal to equity. When talking about the balance sheet, we give you a good story to tell.
One day, a dry cleaning owner was selling his dry-cleaning shop. The equipment is new, the location is excellent, and there are many loyal customers. However, after a friend bought the shop, he found a big problem. Because the past owner has sold hundreds of thousands of dollars gift cards, the future revenue that the new owner should get is all pre-paid, which means a significant loss. Where is the problem? The gift card sold should be listed as a liability or a debt on the balance sheet. It's ridiculous not questioning it before purchasing. It's like you buy a business but don't know how much debt it owns.
The story seems stupid, but it could happen. The story tells: if you don't know the business, find someone who knows to help; if you have nobody who knows to help but still do business transactions, then it's doomed to be deceived.
One day, a dry cleaning owner was selling his dry-cleaning shop. The equipment is new, the location is excellent, and there are many loyal customers. However, after a friend bought the shop, he found a big problem. Because the past owner has sold hundreds of thousands of dollars gift cards, the future revenue that the new owner should get is all pre-paid, which means a significant loss. Where is the problem? The gift card sold should be listed as a liability or a debt on the balance sheet. It's ridiculous not questioning it before purchasing. It's like you buy a business but don't know how much debt it owns.
The story seems stupid, but it could happen. The story tells: if you don't know the business, find someone who knows to help; if you have nobody who knows to help but still do business transactions, then it's doomed to be deceived.
