What is a Balance Sheet?

A Balance Sheet is an accounting report required by all companies registered at Companies House. It is also a useful tool for management to see the amount of assets a business owns including equipment, bank balance and how much is owed at any given time.

The report provides information that is useful when assessing the financial stability of a company. There a number of financial ratios that can be used to asses the businesses financial position, these include liquidity ratios and gearing ratios. These ratios are used by banks and suppliers to work out if the can offer a loan, overdraft or credit facility

A balance sheet shows the following information:

Balance Sheet Template

We have a free Excel Balance Sheet template for you to download free of charge. This template is not suitable for submitting to Companies House, but will enable a small business to produce a report for their year end. If you are a limited company you will need to get you accountant to produce a balance sheet as part of your accounts to submit to Companies House.

Formatting a balance sheet

The report is normally formatted vertical showing the following:

Assets - Liabilities = Equity

The two sides of the equation must always balance.

Below is a typical example of a balance sheet, each link provides further details and how to account for them.

Assets

Fixed Assets 1000
Accumulated Depreciation 100
Total Fixed Assets 900

Current Assets

Stock 2500
Debtors 150
Bank 1250
Total Current Assets 1650
Total Assets 2550

Liabilites

Creditors300
Loan200
Credit card 75
Total Liabilities 575
Net Assets 1975

Equity

Capital 200
Retained Profit 1775
Total Equity 1975

Creating a Balance sheet

Any business which runs accounting software will have the ability to create the report within the software. If you are running a manual system then we have included a free excel balance sheet template.

Balance Sheet Example

balance sheet example

The sample report shows the following information.

The company owns £18500 in Assets. The company is owed £5500 of liabilities this includes £3000 from customers and £2500 in a loan. This is financed by share capital and retained profits from the profit and loss account.

Return from Balance Sheet to Accounting Basics page

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