The balance sheet is your business’s financial flex at a single moment. It’s what you own (assets like cash, inventory, or that slick website) versus what you owe (liabilities like supplier bills or loans). The difference? That’s your equity, your slice of the pie. This sheet tells you if you’re liquid enough to pay bills or scale without choking. A strong balance sheet is your ticket to sleeping easy, knowing you can handle debts and seize opportunities. Don’t sleep on it—it’s your financial reality check, based on your ecommerce accounting.
Your balance sheet will look different depending on whether you are using cash or accrual based accounting, as cash based accounting recognizes certain expenditures, like inventory purchases, AP and AR upon payment. Even so, a balance sheet for cash basis still will include certain components, like cash, certain fixed assets, debt, owner equity etc.
For more on the balance sheet, check out this detailed explanation.