A Balance Sheet is the backbone for every investor or business entrepreneur to make sure that he or she is investing in the right business and getting good return on it. A Balance Sheet Analysis gives a deep insight by comparing all major expenses and income sources to come up with net worth of business as debit or credit. Usually if you are going to purchase an already running business then the first thing you would be interested to see its last three to four years balance sheet. Here is a useful Balance Sheet Template that can easily be used to create a professional balance sheet for any company. However before you plan to fill in this sheet, you must have your accounting information such as Journal Ledgers, Trial Balance, Profit & Loss Statement and if possible Yearly Expense Analysis to further help you collecting the right and accurate data.
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Key Points of a Balance Sheet
Balance sheet is a significant part of each industry as it is a monetary report prepares to portray the whole picture of an organization at a given time. Balance sheet can be prepared after a fixed interval of time based on the nature of volume of your business. Basic principle of balance sheet is to present the complete record of your business assets and liabilities. It will help you to understand how much you personally invested in the business and what you owe from other sources. It is best tool to manage your inventory and billing system of your business. You can improve the financial state of your business with the help of balance sheet as it is great tool for this purpose. Balance sheet focused on assets and liabilities of the business to illustrate the financial status of the business. If you want a balanced report for your business pecuniary status then you have to create a balance sheet.
Key Points of Balance Sheet
- Balance sheet basically has two columns to list your assets and liabilities. Asset column will include cash on hand, account receivable and inventory. You also have to include prepaid or other expenses on this column. All types of assets such as note due and other types of due payments should be included under this column.
- Left column of the balance sheet list your legal responsibilities such as loans, accounts payable and taxes you may owe. Net worth of the owner is also added to the liability side and then both columns are totaled. Both sides should be equal therefore this sheet is known as balance sheet. If both sides are mismatched then you have to go through your accounts again.
Benefits of Balance Sheet
Balance sheet is really useful for you and with the use of balance sheet you can get following benefits:
- The information of your balance sheet helps you to borrow money from your bank because financial organizations evaluate your financial status with the help of balance sheet. This is the main reason therefore it is necessary to prepare balance sheet according to the requirements of your business.
- Balance sheet helps you to analyze overall picture of your company and you can improve the status of your organization therefore make accurate financial statement for you.
- Balance sheet will help you to analyze the pecuniary state of your organization to take important decisions for your organization. It will let you know either your organization can hire new employees or you have to provide a raise to your current employees.
- If you ever want to sell your business then the buyer will like to see financial statement of your company in order to take buying decision.
- It is necessary to prepare a balance sheet in every year and keep proper record of balance sheet of each year because it is one of the best tools to see the growth trends of your business. It will help you to take important decisions about your business.