An entrepreneur can look at a healthy bank balance and assume the business is worth that much. Not necessarily — the business may owe suppliers, have unpaid invoices, or own equipment and other commitments not visible from the bank balance alone.
Frequently Asked Questions
Is the bank balance the same as business profit?
No.
Can a business have money in the bank but still owe more than it owns?
Yes.
Why do businesses need accounting records?
They provide a broader picture of financial performance and financial position.