The Balance Sheet
A balance sheet provides a
View of your business’ value at a specific point in time
Summary your business assets (the things it owns) and its liabilities (the things owed to it)
Measure of its ability to pay back what it owes
If you're running a limited company your balance sheet, along with your annual profit and loss statement
, forms part of the annual statutory management accounts required by Companies House.
What's included in a balance sheet
A balance sheet is typically split into:
Fixed assets, such as buildings, land, machinery, computers, as well as intangible assets such as patents, trademarks and website domain names
- Current assets, such as stock, work in progress, money owed to you(debtors) and cash
- Current liabilities (things due to be paid within one year), such as money you owe to suppliers, short-term loans, overdrafts, and taxes due within the year (VAT, PAYE, National Insurance)
- Long term liabilities, such as loans and shareholders’ funds
The important thing to remember is that the total assets and total liabilities (including shareholders equity and the profit or loss from the previous year) must always balance, that's why it's called a balance sheet!
However it's not an exact science as there are no strict rules on how to value some of the items so seek advice from a qualified accountant who will be up to date with the latest legislation and good business practice in this area.
Example of a Balance Sheet
A balance sheet will usually look something like this:
| Fixed assets (listed by item)
| Depreciation (listed by item)
| Total fixed assets
| Current assets
| TOTAL ASSETS
| Current liabilites (eg bank loan tax)
| Profit from previous year
| CAPITAL AT YEAR END
Other business financial reporting tools
Cash Flow Forecasts
Profit and Loss accounts
Break Even Analysis
Free sample balance sheet template
Free downloads of example balance sheet templates
are available from the Microsoft Office Online website.