Financial statements are routine in the business world. They serve the company to fulfill its legal obligations, but also to make strategic decisions regarding its assets. That is why it is important to know how to make a balance sheet, it is one of the most significant accounting reports.
The report is what reveals the equity and financial situation of a company within a period of time. Now, in this post, we will explain what it is, what is the importance and how to make a balance sheet for your company. You’ll see how much simpler than you think!
What is balance sheet?
At the end of any action, it is interesting for the company to “take stock” of its activities, from which it is essential that an entrepreneur knows how to make a balance sheet.
This is how marketing, for example, evaluates the results generated by an advertising campaign to optimize future strategies. And it is also in this way also in accounting , which assesses the assets and costs of the period that has passed to project the future of the company.
This is what it is like to make a balance sheet, to present the position of the business in relation to its finances and its patrimony, within a determined period of activities, which is generally 1 year.
What is the importance of the balance sheet?
The balance sheet is one of the mandatory financial statements for all companies and must present a true picture of the financial and equity situation of the business.
Thus, it can be used for two purposes: financial accounting and management accounting. In other words, knowing how to make a balance sheet will serve both to inform external agents, such as government, shareholders and financial institutions, as well as to assist in decision making by managers, partners and employees.
But, for that, the balance sheet needs to present transparent and reliable data. Therefore, it must be developed in accordance with accounting standards and good practices, regulated by legal norms and class entities.
How to make a simple balance sheet?
To learn how to make a balance sheet, you first need to know the structure of this report. It consists of two parts, which present the survey of the company’s assets and liabilities.
Assets are everything that the company has, including assets and rights, in addition to investments that can bring economic benefits. For this part of the report, you must list the following items:
– Current assets – accounts receivable from customers, taxes recoverable, items in inventory, expenses for the following year, etc .;
– Non-current assets – credit with partners, permanent investments, land, machinery, equipment, intangible assets , etc.
Liabilities are the company’s financial obligations to the government, other companies and their employees. At this point, in relation to how to make a balance sheet, you must list the following items:
– Current liabilities – accounts payable to suppliers, labor obligations, tax obligations, loans, financing, etc .;
– Non-current liabilities – long-term loans and financing, long-term accounts payable, long-term labor contingencies, etc.
From this survey, the balance sheet must present the company’s net worth. It is obtained, simply, by the difference between the value of assets and liabilities and, thus, demonstrates the capital that the company has.
The equity result can reveal important issues. A company, for example, that has a liability greater than the asset owes more to third parties than it has in equity. The company that has an asset greater than a liability is able to honor the financial obligations it has.
How to make a balance sheet is basically to create a list of all assets, debts, investments, among other assets and liabilities. Did you notice how complex or difficult it is to understand?
Perhaps only your application of how to make a balance sheet is a little laborious, as it requires the utmost attention in filling it out. All items must present the correct values, if they cannot generate errors in the balance sheet and compromise the financial health of the business.
But you can simplify this process if you keep all accounts and records organized, and don’t let everything accumulate towards the end of the year.
To maintain control, it is good to update the balance sheet table month by month, especially in medium and large companies, which deal with a greater complexity of assets and liabilities.
Thus, after knowing how to make a balance sheet in a precise and rigorous way, you can have a clear view of your company’s situation and can plan the future of the business without taking so many risks.
For this, it is important to have the service of an accountant , who is the professional trained to carry out a balance sheet within the legal requirements and without damaging errors to the business.
