Basic Balance Sheet Report Red Flags

If you are a small business owner and are actually reviewing your business financial reports from time to time, here are some tips to help see potential dangers on your Balance Sheet (Assets, Liabilities & Equity) report:

  • Negative Account Balances
    • Unless you have an Accumulated Depreciation asset type of account, you may want to closely inspect any other balance sheet account that has a negative account balance showing on your Balance Sheet or other financial report (such as Inventory Stock Status, AR or AP Aging). I would recommend drilling down into the history of this account and finding out what specifically lead to this negative balance showing on your Balance Sheet and then perhaps contact your C.P.A. to find out what can be done to rectify this.
  • Obsolete Accounts
    • If you closed a business bank, credit card, escrow or loan account some months or years past, but this account is still showing a current balance on your Balance Sheet, then it may be time to get this resolved; otherwise it shows that this obsolete account is still active in your business world.
  • Incorrect Balances
    • If it seems obvious by looking at your Balance Sheet that some of your account balances are off, an easy check would be to compare to other party statements such as bank or credit card monthly closing statements or an inventory stock status report from your warehouse. Be sure to also look are your Reconciliations history report in your financial platform to ensure proper Balance Sheet account reconciliations have been performed on a consistent basis and are also recent.
  • Balance Sheet accounts with sub-accounts
    • Sub-accounts can be tricky to properly maintain and reconcile. Be sure you are not mixing sub-accounts with the actual parent account. Also try to ensure the sum of your sub-accounts equals the parent account balance.


Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.

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