A balance sheet is the last of the three financial reports that are required reading in every business plan, and provides a snapshot view of your business' financial situation at a specific time only. This means that your balance sheet can differ greatly from day to day, or month to month, although most businesses only need to create a balance sheet once a year. Balance sheets used in business plans are called pro forma balance sheets, and essentially take the information in the income statement and cash flow projection and compile them into one, easy-to-read document.
Why Do I Need a Balance Sheet?
The income statement only shows a portion of a businesses' financial picture. Perhaps there are excellent profits being made, but what about its debt load? (i.e. is the business holding too debt much in relation to its profit?) As well, the other financial statements don't give a good enough view to a bank manager or loan company just how solvent a company is (meaning: what ability the business has to liquidate its assets to potentially pay off its debts). A strong balance sheet equates to a better lending risk.
Sample Balance Sheet Format
The following sample balance sheet format is a standard format, and may need altering to fit your specific business setup, goals and requirements, but essentially the "right" balance sheet format will include all of the accounts listed in the General Ledger.
At the top of the balance sheet, list the company name on one line, and the date the balance sheet is relevant for on the next. Then, create a section each for assets, liabilities and equity. In each section the following items should be listed in columnar format, being added or subtracted as demonstrated in this sample balance sheet format:
ASSETS
- current assets + cash in the bank + petty cash = net cash (by totaling the previous three items);
- inventory + accounts receivable + net cash = total current assets
- fixed assets + land + buildings - depreciation = net land and buildings
- equipment - depreciation = net equipment
- total assets
LIABILITIES
- accounts payable + wages payable + taxes payable = total current liabilities
- long term loans + mortgage = total long term liabilities
- total liabilities
EQUITY
- owners equity + owners draws + retained earnings + current earnings = total earnings
- total equity
At the end of the sample balance sheet, if ASSETS = LIABILITIES + EQUITY, then its done properly. Congratulations!
Balance Sheet Examples
For examples of several different balance sheets for a wide variety of industries, try these Free Business Plan Templates and More Free Business Plan Templates. Or, go back to the Free Business Plan How To.
Bonny Albo - Bonny offers 20 years of writing experience to her readers. CNN, MSNBC, The LA Times and Macleans all reference her for expert advice.
