The Balance sheet is the type of reporting that almost all business entities are required to prepare. This document presents the most complete overview of all the processes that take place within the company.
A Balance sheet is a document that characterizes the overall condition of the assets and liabilities of the enterprise at a certain point (date) in monetary terms. That is, using the Balance sheet, the financial image of the company is reflected. This type of reporting determines its success in terms of independent activities, as well as in terms of interactions with other organizations and the results of these interactions.
Balance sheet data inform the owner of the enterprise about assets, the amount of reserves, investments, and capital that they own. It is a necessary document for the management and employees of the financial department. With the help of this report, you can make short-term and, sometimes, long-term plans.
The Balance sheet of the enterprise consists of two sections.
- Assets section consists of two parts: fixed assets and current assets.
- The liability section contains the following components: short and long-term liabilities and capital.
The totals of both sections should always be the same.
The completion of the Balance sheet is carried out by filling in all the lines of the Balance sheet template intended for this by the entrepreneur. Both halves of the document are formed by lines, where indicators that characterize the financial position of a given enterprise are entered. Each line shows the name of the indicator that is displayed in this line.
The totals for each subsection are also calculated. Then, the final total amount of the assets is found by summing up all indicators in the lines on the left side of this Balance sheet template, which are ordered according to their liquidity. Next, according to the same technique of filling out the assets, the liability lines of this Balance sheet template are filled out.
At the same time, all activities carried out by the company should be taken into account, adding or removing lines from the Balance sheet template based on what information needs to be presented. Usually, the company would have a line for each bookkeeping account. However, sometimes, it makes sense to combine some categories to present a more concise report.
The reflection of amounts in the Balance sheet can be rounded to hundreds, thousands, or millions, which is denoted in the line stating the date of the statement. So, if the cost of real estate that is in the possession of this company is $10,000,000, then in the Balance sheet this amount can be reflected as 10,000 thousand. Some companies with a very large scale of operations may use their own abbreviation, which is convenient for them. You can choose how to express the indicators when filling out the Balance sheet template.