Summarise with AI
The accounting equation
Assets = Liabilities + Equity
It holds by construction under double entry. The three parts are:
- Assets — what you own: bank accounts, receivables, stock, equipment
- Liabilities — what you owe: payables, GST, PAYG, superannuation, loans, accrued leave
- Equity — the residual: owner contributions, drawings, retained earnings
If it does not balance, an entry is missing or one-sided — the same failure a trial balance catches.
The liabilities Australian businesses understate
Four liabilities are routinely missing or wrong on small business balance sheets, and all four are employment-related:
- Accrued annual leave — earned but untaken leave is money owed, and it is payable on termination
- Superannuation payable — accrued but not yet remitted to the fund
- PAYG withholding — withheld from wages and owed to the ATO
- GST payable — net of what you collected and what you paid
Leave is the one most often ignored, because it accrues invisibly. A business with twenty staff and no leave provision can be carrying a five-figure liability it has never recorded.
Point in time, not period
A balance sheet is a snapshot at a date — it carries an "as at" heading, ordinarily 30 June for an Australian financial year. An income statement covers a period between two dates.
They connect through retained earnings: this period\u2019s net income flows into equity, which is why the two statements have to be prepared together to agree.
Key takeaways
- Assets = liabilities + equity, always
- It is a snapshot at a date, not a report over a period
- Accrued leave, super payable, PAYG and GST are the commonly understated liabilities
- Net income flows into equity, which links the balance sheet to the P&L
Accrued leave and unpaid superannuation are real balance sheet liabilities — RosterElf tracks the leave balances behind them.
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