Creating a balance sheet is easier then you would have thought. It is needed for your annual report and is a useful document to use in evaluating your businesses financial position. A balance sheet gives a great view of your businesses financial position it list’s all liabilities – debts, payments due etc. and assets – cash, equipment, stock etc. By doing this you can see the ratio of assets to liabilities the higher the ratio the more secure your business is. For example if you can cover your liabilities 5 times by your assets you are more stable then a business that can barely cover their liabilities one disruption can send that company into an insoluble position which means it cannot pay it’s debts this is not where you want your business to be.
The Balance Sheet Can Include:
Fixed Assets:
- Machinery
- Property
- Vehicles
- Trademarks
- Domain names
- Brand value
Current Assets
- Stock
- Cash
- Debtors
Liabilities:
- Loans
- Payments due
- Taxes
- Overdrafts
Long Term Liabilities
- Loans (over a year to pay)
Shareholders Equity
- Stock
- Retained earnings
You split your assets into two types fixed assets and current assets fixed is stuff that would not be easy to convert to cash for example your property may cover your liabilities but if they want the money in a day you are going to struggle to sell the property by then. The reason to split these is because it gives a clearer picture of the companies financial position. Here is an example of a balance sheet to give you an idea of how it should look. Â Assets can also include intangible assets such as brand value. You also need to include shareholders equity this is the total value of equity for all the shares in the business to show what your net current assets are financed by.
Balance Sheet Example
Fixed Assets
Property – £300,000
Current Assets
Cash – £150,000
Current Liabilities
Payments Due – £30,000
Long Term Liabilities
Loan – £300,000
Net Current Assets = £120,000
Total Net Assets = £420,000
Shareholders Equity
Share Capital – £270,000
Retained Earnings – £150,000
Total Shareholders Equity (Capital) = £420,000
Now you should be able to produce and understand a balance sheet we will show you how to produce your profit and loss account next time. You can pay an accountant to deal with this but if you are a startup it will probably be too expensive for something that you could do yourself in half a day. Leave any comments or questions that you may have or if you have any suggestions or tips on preparing balance sheets.
Related posts:
- Get Affordable Fixed Rate Mortgage Loan Rates
- Top twenty searches on the business resources search engine pLnx
- Writing A Business Plan
- Choosing A Business Bank For Your Startup
- Business Startup Loans
| |
Tweet |
|
RSS
POSTS BY EMAIL
