Reading the Balance Sheet

In this article, we'll learn about reading a balance sheet, which provides a snapshot of your company's overall financial health. Your balance sheet lists all of your company’s assets, liabilities, and equity in one simple document. We'll also cover what these three terms mean.

It can be tempting to look only at the profit and loss (P&L) statement, which measures profitability, as an indicator of your company's current health. However, the balance sheet offers a much more comprehensive overview.

This report is called a "balance sheet" because it represents an equation that always needs to balance. Your total liabilities, added to your total equity, always equal your total assets.

Reading a balance sheet

To locate the balance sheet in LivePlan, click on the Forecast tab and then click Balance Sheet:


A standard balance sheet has three sections -- Assets, Liabilities, and Equity, as shown below. Under each of these lines, you'll see all the items that make up that section:


Note: You can expand and collapse lines of this table to see more details by clicking on the triangle to the left of any of the lines in bold. To expand or collapse the entire table, click on the triangle to the left of the Projected Balance Sheet.


In the balance sheet, assets are everything your company currently owns that has cash value. These might include money in the bank, accounts receivable, inventory, and so on.

Note: The term "assets" can be a little confusing because you may have also entered some asset entries (representing major purchases) into your forecast. Just know that the value of those assets is part of your balance sheet assets, along with your cash, inventory, and accounts receivable.
  • Current assets are those that can be converted to cash within one year. They typically include cash, stocks, accounts receivable, prepaid expenses, and inventory. If you need to liquidate some cash for your business quickly, the current assets give you an idea of how much is available.
  • Long-term assets are things like equipment, machinery, vehicles, land and buildings, furniture and fixtures, and leasehold improvements -- items you'll use over a longer term. Because these assets depreciate over time, you'll also see an Accumulated Depreciation line in your balance sheet, tracking the decrease in these assets' value.
  • Some assets, such as annual service contracts, don’t fit within either of these categories. So the LivePlan balance sheet includes an “Other current assets” line for these items—typically any "Current Asset" entries you've created in your forecast.


In the balance sheet, liabilities are everything your company owes, such as accounts payable, credit card balances, loan repayments, and so on.

  • Current liabilities are items you owe that are due within one year. These typically include things like lines of credit and short-term loans or the portion of any longer-term loan you'll need to pay within one year. Current liabilities also include accounts payable and taxes payable. 

    (Related: Why can't I see cumulative tax totals in my financials?)

  • Long-term liabilities are business obligations that are due outside of one year, such as any longer-term bank debt or shareholder loans.
  • Some balance sheets will also have a Prepaid Revenue line. If you've set your forecast to spread out multi-month charges, and you are using recurring revenue (subscription) streams in your forecast, this line will appear. It basically represents the future value of a large subscription payment.


Equity measures your company's current net worth. It's the result you get when you subtract your liabilities from your assets. It's also defined as the total of all the money invested in your company plus your accumulated profits. Owner’s equity includes common stock, retained earnings, and paid-in capital (described below).

  • Paid-in Capital is the amount of money invested in your business, either by you or by investors.
  • Retained Earnings are the funds you have left at the end of the year. Essentially, retained earnings are your previous profits minus any dividends you've paid out to investors. These earnings are then re-invested into the company in the following year. 
  • Earnings are the same as your company's profits. If your company is profitable, then your earnings will accumulate month by month in the balance sheet.

In LivePlan, the balance sheet is labeled “projected." This means that the numbers are estimates for future planning, not a record of your actual business performance. For a more detailed understanding of the balance sheet, we recommend reading the following articles:

Adding financing from the balance sheet

LivePlan gives you the option to easily add funding sources from the balance sheet. To do this, click the Add AssetAdd Loan, Add Line of Credit, or Add Investment buttons:

Clicking the Add Asset button opens the same asset overlay accessible from the Assets step in the forecast.

Likewise, clicking either of the other buttons (Add LoanAdd Investment, Add Line of Credit) opens the appropriate overlay from the Financing step in the forecast. 

Entering starting balances for existing companies

To enter starting balances for an existing company, click the Set Starting Balances button:


Then, follow the instructions in Entering initial balances for an existing company

Editing the balance sheet

In LivePlan, you can't edit the Balance Sheet directly - instead, you'd edit the individual forecast entries that are calculated into the Balance Sheet. Click on the Forecast tab of LivePlan, and then navigate to the page of entries you need to edit. You can click on any entry to update its contents.

For more information:

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