Balance Sheet: the Basics
Balance sheets: the basics
A balance sheet is a financial statement at a given point in time. It provides a snapshot summary of what a business owns or is owed.
It states what assets the business ownes and what it owes – liabilities, at a particular date.
The balance sheet is uded to show how the business is being funded and how those funds are being used.
The balance sheet is used in three ways:
• for reporting purposes (limited company's annual accounts) • help interested parties assess the worth of your business at a given moment - such as investors, creditors or shareholders • helps you analyse and improve the management of your business
You must consider who is the best person to produce balance sheets and when. This document shows the different elements to inlude in a balance sheet and and how to use the information from to assess and manage business performance.
Who must produce a balance sheet?
Limited companies and limited liability partnerships must produce a balance sheet as part of their annual accounts.
The balance sheet will then need to be submitted to:
• Companies House • HM Revenue & Customs (HMRC) • shareholders - unless agreed otherwise
The other annual document you must produce is the profit and loss account.
Other parties who may wish to see the accounts are:
• potential investors or lenders (banks) • potential purchasers of the business • employees • trade unions
There are strict deadlines for submitting annual accounts and returns to Companies House and HMRC - penalties will apply if they are received late. Their websites can be found in the ‘useful links’ section.
Other business structures
Self-employed people, partners and partnerships are not required to submit formal accounts and balance sheets on their tax return. You should still produce a balance sheet so that you are aware of your business activity.
Contents of the balance sheet
A
A balance sheet is a financial statement at a given point in time. It provides a snapshot summary of what a business owns or is owed.
It states what assets the business ownes and what it owes – liabilities, at a particular date.
The balance sheet is uded to show how the business is being funded and how those funds are being used.
The balance sheet is used in three ways:
• for reporting purposes (limited company's annual accounts) • help interested parties assess the worth of your business at a given moment - such as investors, creditors or shareholders • helps you analyse and improve the management of your business
You must consider who is the best person to produce balance sheets and when. This document shows the different elements to inlude in a balance sheet and and how to use the information from to assess and manage business performance.
Who must produce a balance sheet?
Limited companies and limited liability partnerships must produce a balance sheet as part of their annual accounts.
The balance sheet will then need to be submitted to:
• Companies House • HM Revenue & Customs (HMRC) • shareholders - unless agreed otherwise
The other annual document you must produce is the profit and loss account.
Other parties who may wish to see the accounts are:
• potential investors or lenders (banks) • potential purchasers of the business • employees • trade unions
There are strict deadlines for submitting annual accounts and returns to Companies House and HMRC - penalties will apply if they are received late. Their websites can be found in the ‘useful links’ section.
Other business structures
Self-employed people, partners and partnerships are not required to submit formal accounts and balance sheets on their tax return. You should still produce a balance sheet so that you are aware of your business activity.
Contents of the balance sheet
A