A Balance Sheet is a financial reflection of a business or an individual’s financial standings at a particular span of time. A balance sheet shows the assets and the guidelines to balance those assets with the equity and expenses applied for purchasing them. The quarterly or annual accounting reports displays the balance sheet of the company. The term balance sheet might sounds very financial but in reality every person can create balance sheet to manage their budget and expenses. In simple terms a balance sheet document crafted in a standard accounting format exhibiting assets and liabilities no matter what size or nature the business holds.
The Balance Sheet integrate current assets. The following things are included in current assets like cash, prepaid expenses accounts receivable stocks and bonds, , inventory, and anything else that can be displayed as cash in a running business. You can figure out cash as cash in hands, petty cash or the cash in bank .You have to be vigilant about the account receivable by checking those potential customers who owe you money Inventory means goods ready for sale, raw material products under manufacturing which are put to sale after completion. You have to list the prepaid assets as current asset because you have already paid for the service or products. These all parameters are added to generate the total current asset .Besides the current assets there are some fixed assets that are kept for long although small business lacks such assets it includes furniture building equipment and similar items. Compute the fixed asset amount through proper financial calculations.
Balance Sheet Template Word
After the asset’s subject has dealt then comes the liabilities. Liabilities are declaration of creditors against the assets. They are basically debts liabilities is categorized in two sections current liabilities and long-term liabilities. Liabilities are defined in the balance sheet in an orderly manner like the one which has to pay early is documented first. Account payable and net payable are the current liabilities and large loans used as capital investments lies in the category of long-term payable which has more time to return. To prepare your balance sheet you have to compute your total liabilities with both categories.
The next area of your balance sheet deals with the Net worth showing the left over after subtracting liabilities from assets ., it is also called as owner’s equity. If the business runs on sole propriety this equity is calculated when profit is added to the investment and loss is subtracted .Now take a total net worth and when you get these readings you are going to have your balance sheet done. Compiling a balance sheet is not a big task; you have to further analyze it through some ratio calculations and assessments. When you calculate the current ratio, debt/worth ratio, quick ratio, and working capital, for your company you are able to properly analyze your balance sheet perfectly. It is required to evaluate and compare your quarterly and monthly balance sheet to have a clear picture of the business financial status. You can prepare your balance sheet manually through proper guidance or take help from available software and templates to do the job for you.