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A balance sheet shows what your shop owns, what it owes and the owner’s equity on a specific date. Also called a statement of financial position, it brings together cash, stock, customer debts, equipment and unpaid obligations. The basic rule is: assets = liabilities + owner’s equity.
You might have NGN300,000 in cash and the bank, cartons on the shelf and a supplier asking for payment. The bank balance tells you only part of the story. You also need to know what those cartons cost, who still owes you and which bills are coming due.
Here’s how to read a balance sheet for a Nigerian retail shop, with a worked example you can follow line by line.
What goes on a shop’s balance sheet?
A balance sheet has three parts: assets, liabilities and equity. It reports the balances as at a date, such as 31 August 2026. The Australian Government’s balance sheet guide explains this date-specific view and how it helps a business assess its ability to meet debts.
Assets: the shop’s resources
Assets include cash, bank balances, stock the business owns, money customers owe and equipment used in the shop. A successful POS payment awaiting settlement is an amount due from the payment provider until it reaches your bank. Keep it separate so you don’t count it in both places.
Current assets are generally expected to be used, sold or collected within the normal trading cycle or the next 12 months. For most small shops, that includes stock, customer debts and rent paid ahead for the coming months. Equipment used over several years belongs among non-current assets.
Stock needs particular care. Use its cost, with a reduction where its expected recoverable selling amount has fallen below that cost. Don’t use the price on the shelf label. IAS 2’s inventory guidance measures inventory at the lower of cost and net realisable value, which is the expected selling price after costs needed to complete and make the sale.
For example, 100 bottles that cost NGN2,000 each normally contribute NGN200,000 to inventory, even if you plan to sell them for NGN3,000 each. That future margin hasn’t been earned yet. Our guide to how COGS works explains how the cost moves out of stock when you sell.
Liabilities: the shop’s obligations
Liabilities include unpaid supplier invoices, outstanding loans and expenses already incurred but not yet paid. They can also include tax owed and customer deposits for goods you haven’t supplied. Cash received as a deposit comes with an obligation to deliver the order or deal with a refund.
Separate amounts due soon from longer-term obligations. In a straightforward shop balance sheet, supplier debts and the loan principal due within the next 12 months belong in current liabilities. The portion of a loan due later is shown separately. Use the repayment schedule to split the outstanding principal, rather than putting the whole loan in one category.
Owner’s equity: the owner’s interest in the business
Equity is what remains in the accounts after deducting liabilities from assets:
Owner’s equity = total assets − total liabilities
For a simple sole trader, you can also trace it through capital put into the business, plus accumulated profit, minus personal withdrawals, known as drawings. Losses reduce it too. A limited company presents its equity differently, with items such as share capital and retained earnings.
Equity can be spread across cash, stock and equipment. It doesn’t have a separate drawer you can open.
A balance sheet example for a Nigerian retail shop
Take an imaginary sole trader’s shop as at 31 August 2026. In this example, the customer debts are expected to be collected, monthly adjustments are complete, and there are no tax balances or customer deposits to add.
The shop has NGN1,600,000 in assets and NGN700,000 in liabilities. That leaves NGN900,000 in owner’s equity:
| Balance sheet item | Amount |
|---|---|
| Current assets | |
| Cash in the shop | NGN50,000 |
| Business bank balance | NGN250,000 |
| Customer debts (accounts receivable) | NGN150,000 |
| Stock at cost, after valuation checks | NGN700,000 |
| Rent paid ahead for the coming months | NGN120,000 |
| Total current assets | NGN1,270,000 |
| Non-current assets | |
| Equipment, after accumulated depreciation | NGN330,000 |
| Total assets | NGN1,600,000 |
| Current liabilities | |
| Supplier debts (accounts payable) | NGN300,000 |
| Expenses incurred but still unpaid | NGN50,000 |
| Loan principal due within 12 months | NGN100,000 |
| Total current liabilities | NGN450,000 |
| Non-current liabilities | |
| Loan principal due after 12 months | NGN250,000 |
| Total liabilities | NGN700,000 |
| Owner’s equity | |
| Capital introduced to date | NGN700,000 |
| Accumulated profit to date, before drawings | NGN300,000 |
| Less: drawings to date | −NGN100,000 |
| Total owner’s equity | NGN900,000 |
| Total liabilities and owner’s equity | NGN1,600,000 |
Both sides agree: NGN1,600,000 = NGN700,000 + NGN900,000.
The equipment originally cost NGN450,000. Accumulated depreciation of NGN120,000 leaves the NGN330,000 carrying amount shown here. Depreciation spreads the equipment’s cost over its useful life; the balance shown isn’t a quote for what someone would pay for it today.
The NGN120,000 prepaid rent covers future months. As those months pass, the relevant amount becomes rent expense and the prepayment falls. Charging all of it to the current month’s running costs would misstate both that month’s profit and the remaining asset.
How to read the figures before making a decision
Start with cash available and the dates of upcoming payments. Then check whether customer debts can be collected and stock can sell at the recorded values. Finally, compare equity with the previous period and explain the change through profit, losses and owner transactions.
Check payment dates, not just total assets
Our example has NGN300,000 in cash and the bank, against NGN450,000 in current liabilities. That does not mean all NGN450,000 is due tomorrow. List the actual due dates and expected receipts before deciding whether the shop can afford another order.
Current assets exceed current liabilities by NGN820,000. This is working capital: current assets minus current liabilities. Yet NGN700,000 of those assets is stock, and prepaid rent cannot pay a supplier. A positive working capital figure still needs a cash plan.
Look closely at stock and customer debts
Open the product list behind the NGN700,000 inventory balance. Check quantities, costs, damaged goods and products that have stopped selling. The total alone won’t tell you that one expensive carton has been untouched for six months.
Do the same for the NGN150,000 in customer debts. A list of names, amounts and due dates is more useful than one total. If a balance is unlikely to be collected, review the necessary adjustment with your accountant.
Explain why equity changed
The example’s NGN900,000 equity includes NGN700,000 contributed by the owner. Calling all NGN900,000 “profit” would overstate what the shop earned. Compare capital, profit and withdrawals separately when checking whether trading has strengthened the business.
For a sole trader, drawings reduce cash and equity without becoming a business running expense. Payments from a limited company to its owners need their appropriate treatment, such as salary, dividends or a director’s loan.
How everyday transactions change the balance sheet
Every recorded transaction affects at least two accounts. Some move amounts between assets; others change liabilities or equity. The table below treats each transaction separately and leaves out VAT, fees and other transactions so the effect is easy to follow.
| Transaction | Effect on the balance sheet |
|---|---|
| Buy NGN100,000 of stock and pay immediately | Cash falls NGN100,000; inventory rises NGN100,000. Total assets and equity stay the same. |
| Receive NGN100,000 of stock on supplier credit | Inventory and supplier liabilities each rise NGN100,000. Equity stays the same. |
| Sell goods costing NGN12,000 for NGN20,000 cash | Cash rises NGN20,000 and stock falls NGN12,000. Assets and equity rise NGN8,000 through profit, before any other expenses. |
| Collect NGN30,000 from an existing customer debt | Cash rises NGN30,000; customer debts fall NGN30,000. It creates no new sales revenue. |
| Receive a loan of NGN100,000 | Cash and loan liabilities each rise NGN100,000. The receipt creates no sales revenue or profit. |
| Repay NGN20,000 of loan principal | Cash and the loan liability each fall NGN20,000. Any interest is recorded separately as an expense. |
A restock can therefore leave you with less cash and exactly the same equity. The article on recording a sale and the restock it pays for follows that sequence in more detail.
How to prepare your shop’s monthly balance sheet
Prepare every balance at the same closing date. Reconcile cash and bank accounts, check stock and outstanding debts, then record adjustments before producing the report. Don’t combine today’s stock count with last month’s supplier balances; the figures describe different points in time.
- Choose the date and gather the records. Use the last day of the month. Collect statements, sales records, invoices, loan schedules and the previous balance sheet.
- Reconcile money accounts. Compare physical cash with the cash book and bank accounts with statements. Check unsettled POS payments without counting them twice.
- Check inventory. Reconcile quantities to a physical count, confirm costs and record approved losses or valuation adjustments. Exclude goods you don’t own, such as supplier stock held on consignment.
- Confirm what is owed. Review customer balances, supplier statements, unpaid bills, deposits and applicable tax balances. Include goods received on credit even if you haven’t paid the invoice.
- Update equipment, prepayments and owner accounts. Account for depreciation and expenses belonging to the month. Check capital introduced and drawings against records, with your accountant’s help where needed.
- Produce the report and investigate differences. Confirm that assets equal liabilities plus equity. Compare each balance with the previous month and check unexpected movements against the underlying entries.
If the totals disagree, trace the missing or incorrect entries. An invented “capital adjustment” might make the arithmetic work while leaving the records wrong. Our bookkeeping guide for Nigerian retail shops covers the daily routine that gives this monthly check a reliable starting point.
Balance sheet vs profit and loss vs cash flow
The balance sheet describes a position at one date. A profit and loss report measures earnings over a period, while a cash flow statement explains cash movements over a period. Read them together to connect the shop’s trading results with what it owns and can pay.
| Report | Period covered | Main question |
|---|---|---|
| Balance sheet | As at 31 August | What does the shop own and owe, and what is its equity? |
| Profit and loss | 1–31 August | What did the shop earn after costs and expenses? |
| Cash flow statement | 1–31 August | Where did cash come from, and where did it go? |
For example, a new loan increases bank cash and liabilities without increasing profit. A credit sale can increase profit and customer debts before the payment arrives. Read cash flow vs profit for more on why a profitable month can still leave the bank account short.
Common questions about shop balance sheets
Is owner’s equity the money I can withdraw from my shop?
No. Owner’s equity is the recorded value of assets after deducting liabilities. Some of it may be tied up in stock, customer debts or equipment. Before taking money out, check available cash, upcoming bills and restocking needs. A company’s payments to its owners also need the appropriate accounting and legal treatment.
Can a shop have negative equity?
Yes. Negative equity means recorded liabilities exceed recorded assets. Accumulated losses or large owner withdrawals can contribute to it. First check that the records are complete and correctly valued, then review debts, cash needs and the causes with your accountant. The balance sheet alone does not explain how the position arose.
Does a balanced balance sheet mean my records are correct?
No. Both sides can agree even when a transaction is missing or entered in the wrong accounts. Leaving out a stock delivery and its unpaid supplier invoice understates assets and liabilities by the same amount. Reconcile the figures to stock counts, statements and supporting documents as well as checking the totals.
Does a balance sheet show what my shop would sell for?
No. A balance sheet shows recorded assets, liabilities and equity under the accounting methods used. A buyer may value the business differently because of its earnings, customer relationships, location or risks. The equity figure is a book value, not a guaranteed sale price.
See your shop’s balance sheet in Mayloo
Mayloo’s accounting features include a balance sheet showing assets, liabilities and equity, alongside profit and loss reports. Recorded transactions update the accounts, and you can track stock, expenses, customer and supplier balances, plus export financial data for your accountant.
Start with accurate opening balances and record transactions as they happen. At month-end, reconcile the accounts and review any adjustments needed. Then open the balance sheet and follow the figures back to the stock, payments and debts behind them.