For those who can read the balance sheet, they can learn more about business.
A balance sheet is a report that can help find out the financial position of a company in a certain period. These financial statements must be made by a business or company to get an idea of wealth, liabilities, capital.
Besides the functions mentioned above, the balance sheet also serves to provide an overview to prospective investors of your business about their financial condition. Usually, potential investors will request a copy of the balance sheet. What is reviewed is the balance sheet, profit and loss, retained earnings, and cash flow.
Even though your business counts are still in a small scope, arranging a balance sheet is important because the description of your business is all recorded in the balance sheet. For the format of the worksheet, you can open the balance sheet template on the internet because there are various types of models available and you can choose them according to your needs.
Three elements in the balance sheet
It has been explained above that there are three essential things in the balance sheet. They are wealth, obligations and capital. To find out more, the following is an explanation of the three elements in the balance sheet:
The first is assets. What is meant by assets are business resources owned by the company such as cash, receivables, inventory, and company facilities also included. While the assets themselves are divided into two types, namely current assets and fixed assets.
Current assets are types of assets that have a short-term life, namely those with less or a maximum of one year. Examples of existing assets are cash, accounts receivable, inventory of goods or stock, and equipment.
Fixed assets are the opposite of current assets. Fixed assets are assets that are owned or used for an extended period. It is usually more than one year. All assets included in fixed assets are typically purchased by companies to facilitate the production process and operations of the company. Examples are machinery, buildings, land.
Second is a liability. Liabilities are all company obligations that must be resolved to other parties. Both short and long term. Debt receivables, up-front income, and future fees are included in the liability.
As with assets, debt is also divided into two, namely short-term debt and long-term debt.
Short-term debt consists of notes payable, trade debt, and fees to be paid. This type of debt has a maximum payment period of one year. While for long-term debt is debt paid with an extended grace period. Like mortgage debt and bond debt.
The third is the capital. Capital is the difference between assets and liabilities. If a formula is made, then assets are reduced by liabilities and will produce capital. The money is the right of the owner of the company.
A balance sheet is a financial report that must be compiled by a company. It needs balance sheet template to make it easier to determine the format of the worksheet that suits your needs.