Knowing what a balance sheet is crucial.
Assets represent the total resources of a company, which may shrink or increase depending on the results of operations. Assets are listed in liquidity order - ease of converting into cash.
Liabilities include what a company owes: All businesses divide assets and liabilities into two groups: Net worth is the owner's investment in the case of a proprietorship or partnership or capital stock original investment plus earned surplus earnings retained in the business in the case of a corporation.
These are items that can be converted to cash within one year or in the normal operating cycle of a business.
Also included in this category are any assets held that can be readily turned into cash with little effort, such as government and marketable securities. CASH refers to cash on hand or in banks, checking account balances, and other instruments such as checks or money orders. A rule of thumb is that cash position is generally strongest after the peak selling season.
Marketable securities are usually listed at cost or market price, whichever is lower. When marketable securities appear on a statement, it frequently indicates investment of excess cash.
A retailer, such as a department store, may show its customer charge accounts billed and unpaid in this category. In many businesses, accounts receivable are frequently the largest item on the balance sheet. A company's health often depends upon timely collection of receivables.
Notes receivable may be used by a company to secure payments from past-due accounts, or for merchandise sold on installment terms. Retailers and wholesalers will show goods that are sold "as is" with no further processing or supplies required in shipping.
On the other hand, many manufacturers will show three different classes of inventory: As a company's sales volume increases, larger inventories are required; however, problems can arise in financing their purchase unless turnover number of times a year goods are bought and sold is kept in balance with sales.
A sales decline could be accompanied by a decrease in inventory in order to maintain a healthy condition. Noncurrent assets are defined as assets that have a life exceeding a year. Examples include real estate, buildings, plant equipment, tools and machinery, furniture, fixtures, office or store equipment and transportation equipment.
All of these would be used in producing products for a company's customers. Land, equipment or buildings not used in the production of customer goods would be listed as other noncurrent assets or investments.
Fixed assets are carried on the company's accounting books at the price they cost at the time of purchase. All fixed assets, except for land, are regularly depreciated since they eventually wear out.
The reductions are considered a cost of doing business and are called depreciation expense.
Normally, the accounting procedure is to list the fixed asset cost on the balance sheet less accumulated depreciation. Not all companies are comparable on this item as some rent their equipment and premises.
If a company rents, its fixed asset total will be smaller compared with other balance sheet items. Analysts tend to discount these items or value them very conservatively.
Intangible assets include a company's goodwill, copyrights and trademarks, development costs, patents, mailing lists and catalogs, treasury stock, formulas and processes, organization costs and research and development costs.
Generally they are obligations that are due by a specific date, usually within 30 to 90 days of fulfillment. To maintain a good reputation and successful operations, most businesses find they must have sufficient funds available to pay these obligations on time.
Most current liabilities of small companies generally fall into the accounts payable line. Suppliers dealing in good faith expect their invoices to be paid according to the terms of sale. These can range from net 30 to 60 days after invoice date plus discount incentives of 1 percent or more if payments are made by a specified earlier time.
Maturity dates when payment is due may run up to 20 or more years, e.The Balance Sheet is the last of the financial statements that you need to include in the Financial Plan section of the business plan. The Balance Sheet presents a picture of your business' net worth at a particular point in time.
A balance sheet is a snapshot of the financial condition of a business at a specific moment in time, usually at the close of an accounting period. A balance sheet comprises assets, liabilities, and owners’ or stockholders’ equity.
Each free business plan template is available in Microsoft Word (DOC) format, and many of the Business Plan Forms are available in Excel (XLS) format as well. Just choose a . Farm Business Plan Worksheet Balance Sheet for agricultural businesses operating on a seasonable basis.
If you’re anyone else, the Free Business Balance Sheet Template (Excel format) and the Blank Business Balance Sheet Template (Word doc/docx) are easy ways to get started. This Balance Sheet lets you see your current financial situation at any moment in time.
Free to download and print and many of the Business Plan Forms are available in Excel (XLS) format as well. Just choose a business plan template and download it.
Open it in Word or Excel (or another program that can display the DOC or XLS format), edit. A balance sheet also known as the statement of financial position tells about the assets, liabilities and equity of a business at a specific point of time.
It is a snapshot of a business. A balance sheet is an extended form of the accounting equation.