The goal of the balance sheet is to cross check transaction recordation and categorization for a given period of time, YET, the definitions provided by curriculum stated it was a report detailing a snapshot in time. That is the cognitive pretzel that turned everyone inside out. It was like trying to walk on a sheet of ice.

By adding the start date to the top of the report and by shifting the section that was dependent on a start date to the top, and by showing income and expenses separate not as net income and by showing all the other equity lines separate not aggregated, it becomes easy to realize this is simply an incremental report for transactions. It is an "extended income statement" which shows not only inflows and outflows for income and expenses, but it shows all inflows and outflows for equity too, and that makes it all inclusive for cash flow in and out of a company.

If you are accounting for all inflows and outflows for a company for a given period of time, it makes sense the starting value, which can be verified with third party information, plus all categorized transactions, should equal an ending balance that can be verified with third party information.

This report, in this order now flows from the top to the bottom logically and everything is transparent. Someone had taken an otherwise simple report, inverted the parts, buried relevant facts and created a false tag line for the report for some "odd reason" that can only be related to mental control of the masses or some other nefarious intention. No one truly interested in teaching, education or an accounting literate body politic would have ever "taught" bookkeeping and the Balance Sheet that other way nor used it for reporting that way regularly due to a mountain of unnecessary confusion.

Take a starting Net Worth for any date prior to the report date. Add all money that flowed in and subtract all money that flowed out between the start date and an end date and you will be left with a New Net Worth.

$100 at the beginning of the month + $50 in allowance - $30 in phone service fees = $120 at the end of the month..

If that Ending Net Worth Calculation using a starting net worth and incremental changes equals your bank statement balance for the end of the month ($120), your bookkeeping records and categorization from the start date to the end date is thought to be "in balance".

This seems STUPID doesn't it? How could this help me out? The two will always be equal?

YES, it might but NO it's not.

Imagine you had a space cadet moment and accidentally recorded your phone service fee as $20. instead of $30. Without crosschecking you would think you had $10 more than you had.

More importantly when dozens or hundreds of transactions get involved and some are more complex, errors and mistakes can happen and this is the easiest way to realize those.

In addition to crosschecking yourself, the software that you use to record all your bookkeeping "could burp" and create errors too, albeit extremely rare. This helps find those in the rare event they happen either.

This is a very valuable tool for cross checking your data to make sure no one in your business or bookkeeping process is overtly stealing money from you. It's also a way for you to crosscheck yourself and a way for others who need to review your data to feel moderately confident you aren't cheating on your own financial reporting.

Assets are things you have of value:

1. Cash stored in your piggy bank

2. Cash stored in a banking institution

3. Items you have that have value like a bicycle and computer

4. Items you have purchased or created, with the sole intention to sell are also "assets"

If you died today, your heirs could sell them to buy your casket and head stone! Thus they are Assets.

Above, under assets, we have listed two checking accounts and an inventory account, BUT we only seem to have money in one of the checking accounts....

We don't seem to have any inventory and we don't seem to have anything else of major value if our business shut down today.

A small "service business" like wellness counselling might have this look on the Assets side of things. Naturally, you would assume they have a cell phone and a computer and some other assets worth something!?

Yes. They surely do, but let's keep it simple for now. There is a way to track "minor assets" in a way they don't show up on this report and that they don't need to.

This report is really for CASH and BIG ASSETS like maybe a car or an expensive piece of equipment or anything with a value of over $5000 for example. The threshold each will separate BIG ASSETS from SMALL ASSETS varies and is a personal choice. Keep your thoughts simple now for this learning process.

Above, under Liabilities, we have listed two credit card accounts, a "due to" account, and an odd one we have called "ExpPaidVia".

The credit card accounts are easy to understand. You have spent money using a credit card, and that is the Balance on the Card for a given date in time. The Credit Cards are easy to understand.

What are those other accounts?!?

The "Due to JD" account is easy too. Sometimes a business owner needs to lend his business money to pay the bills. Maybe he is working on a big $30,000 job but he won't get paid for 60 days and his rent of $2500 is due this month. If he has no money in his business account to pay it he can "loan his company money" to pay it. It's a very simple concept. Maybe instead of borrowing money from himself he borrowed it from his parents or wife? No problem, you just make them a "Due To" account too. This is how loans made to a company are tracked.

The "ExpPaidVia" is interesting and not "common" right now as a default liability account but they will be soon enough. Imagine you are a business owner, and you are at a flea market. You see some items you want to buy for your office, but you left your company credit card at home. You could pay that vendor with your personal credit card or cash for the items, but there will be no record of that purchase on accounts that are tracked by default in your business bookkeeping software. So what will you do? You must keep track of every expenditure or you will have to pay tax on profits you should not have to pay tax on .

One option is to write a check from the company to yourself. You could write up an "expense report" detailing the expenses you reimbursing yourself for, just like a vendor would write up a receipt for your purchases and then you could write a check from your company to you for the expenses. That is one very good option, but it requires a little paperwork to do properly.

The other option is to simply records the purchase in your "Expenses Paid Via" account. By doing this you side step the formal expense reporting process and the expenses are documented in your bookkeeping system so you, as the business owner get credit for them and you don't have to pay income tax on money you spent on business expenses.

BUT WAIT A MINUTE?!!? Isn't this JUST LIKE A LENDNIG MONEY TO THE COMPANY and the "Due To Account"? YES it is identical. The only reason this is "suggested" or "included' as a separate account is because it "feels better" to separate these two forms of company debt a little bit.

Money provided and tracked under the "Due To" account is typically much smaller in value. It's money that often times business owners might not reimburse themselves for. This is simply a way to account for those so taxes are not paid on them.

The Expenses Paid Via Account then can also be thought of as a "Credit Card" used by the Business, but YOU, the business owner are the banker!!