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This document provides a template balance sheet and useful background information. The purpose of a balance sheet is to provide a snapshot view of a company's financials. It is a financial statement that summarizes a company's assets, liabilities, and owners'/shareholders' equity at a specified point in time. Each section will list several accounts. For example, the assets will commonly include accounts for current assets (such as cash, inventory, and accounts receivable), fixed assets, property, and equipment. Similarly, the liabilities section will often include accounts for current and fixed liabilities, though the exact accounts listed will vary by company. This balance sheet is a useful analytical tool for every business which can be used to calculate working capital or determine a company's capital structure.
BALANCE SHEET Balance sheet is the summary of Assets, Liabilities and Owners equity. It allows the investors and the interested third parties in business performance to have a snap shot look on performance of business. It is referred as balance sheet because assets have to balance with liabilities. Assets are what a business owns and liabilities are what business owns to others. The liabilities define how the business has paid for its assets; a business can either pay for assets through borrowing or through owner’s equity. Owner’s equity is the claim of interest on business by the shareholder after the liabilities are paid. If liabilities exceed the assets, then negative owners will exist for accounting context purpose. Owner’s equity is calculated as (Assets-Liabilities), the difference is the claim of the owner on assets. The balance sheet allows the owner to evaluate the financial strength of the company by computing debts to the assets ratio. This can be used to determine the business percentage of collateralization of debt financing; the determination assists the business owners to evaluate the action on how to raise capital. If the business is over collateralized, the owner risk loosing control of the business through bankruptcy or debtors influence on how business is run. A highly collateralized business by a major debtor puts the owner into risk of loosing total control of business to the debtor. The balance sheet has Assets and Liabilities. Assets are divided into current assets and fixed assets. Currents assets are the assets which can easily be converted into cash within a short period, while fixed assets are long term assets used by the firm to generate income. Liabilities part of balance sheet includes current liabilities and long term liabilities. Current liabilities forms the part of business obligations which are to be settled in cash within one year, while long term liabilities form part of business obligation which do not fall with one year. The balance sheet can be used by the business to analysis its efficiency and short term financial health by computation of working capital. Working capital is calculated as Current Assets-Current liabilities. If working capital is negative (that is current assets do not exceed current liabilities), this might indicate difficulty in meeting current obligation which can force a business into bankruptcy. Balance sheet can also be used to identify operation efficiency by comparing the current year working capital with previous year working capital; an increase in working capital might be an indication of operation inefficiency such as slow collections of accounts receivable and large amount of inventory in stock. The balance sheet is a snap shoot of business performance created by an accounting system which summarizes the company activities in terms of assets and liabilities. Third parties will use the balance to evaluate the financial strength of the company to make decision in relation to business financial capability. Balance Sheet The Year Ending (Month, Year) Amount ASSETS Current Assets Cash in bank Inventory 0 Accounts receivables Prepaid Expenses Other Total Current Assets 0 Fixed Assets Machinery & Equipment Furniture & Fixtures Leasehold Improvements Real Estate/ Buildings Investments Total Fixed Assets 0 Other Assets Specify Specify Total Other Assets 0 TOTAL ASSETS 0 LIABILITIES Current Liabilities Accounts payable Tax payable Accrued accounts Notes payable (due within 12 months) 0 Current portion of long term debt ( due within the year) 0 Other current liabilities Total Current Liabilities 0 Long Term Liabilities Long Term Debt less Current Portion 0 Notes Payable (greater than 12 Months) 0 Other long term liabilities 0 Long Term Liabilities 0 LIABILITIES 0 Equity Owners Net Worth/Capital Invested 0 TOTAL LIABILITIES 0
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