Your SCORE or SBDC counselor can help you to understand the terminology used in a Balance Sheet, and to prepare a Balance Sheet for your business. Here’s a quick overview to help you get started. To help understand the definitions you may wish to view or print the SCORE balance sheet in Excel format found here.

At the top of the page, fill in the legal name of the business, the type of statement and the day, month and year. Indicate whether amounts will be shown in hundreds or thousands of dollars (never show cents).

ASSETS

Assets are anything of value that is owned by or legally due the business Total assets include all net values: the amounts obtained when you subtract depreciation and amortization from the original cost of acquiring the assets.

CURRENT ASSETS

Cash : Cash and resources that can be converted into cash within 12 months of the date of the balance sheet (or during one established cycle of operation). Include money on hand and demand deposits in the bank (e.g., checking accounts and regular savings accounts).

Petty cash: If your business has a fund for small miscellaneous expenditures, include the total here.

Accounts receivable: The amounts due from customers in payment for merchandise or services.

Inventory: Raw materials on hand, work in progress, and all finished goods, either manufactured or purchased for resale.

Short-term investments: Also called temporary investments or marketable securities, these include interest- or dividend-yielding holdings you expect to convert into cash within a year. List stocks and bonds, certificates of deposit and time-deposit savings accounts at their cost or market value, whichever is less.

Prepaid expenses: Goods, benefits or services a business buys or rents in advance (e.g., office supplies, insurance protection, floor space).

LONG-TERM INVESTMENTS

Also called long-term assets, these are holdings the business intends to keep for at least a year and which typically yield interest or dividends. Include stocks, bonds and savings accounts earmarked for special purposes

FIXED ASSETS

Also called plant and equipment, fixed assets include all resources a business owns or acquires for use in operations and not intended for resale. If fixed assets are leased, depending on the leasing arrangements, both the value and the liability of the leased property may need to be listed on the Balance Sheet 

Land: List original purchase price without allowances for market value.

Building, Improvements, Equipment, Furniture, Automobile/vehicles: For each of these, include original purchase price, less depreciation.

Other Assets: (Any other assets you want to list).

LIABILITIES

CURRENT LIABILITIES

All debts, monetary obligations and claims payable within 12 months or within one cycle of operation. These typically include: 

Accounts payable: Amounts owed to suppliers for goods and services purchased in connection with business operations.

Notes payable: The balance of principal due to pay off short-term debt for borrowed funds. Also includes the current amount due of the total balance on notes whose terms exceed 12 months. 

Interest payable: Any accrued fees due for use of both short-and long-term borrowed capital and credit extended to the business.

Taxes payable: Amounts estimated to have been incurred during the accounting period.

Payroll accrual: Salaries and wages currently owed.

LONG-TERM LIABILITIES

Notes payable : Notes, contract payments or mortgage payments due over a period exceeding 12 months. They are listed by outstanding balance, less the current position due.

NET WORTH

Also called owner’s equity, this is the claim of the owners on the assets of the business. For older businesses, equity is each owners original investment plus any earnings after withdrawals.

TOTAL LIABILITIS & NET WORTH

The sum of these two items must always equal the amount of total assets 

 

This information was excerpted from a 48-page U.S. Small Business Administration publication entitled The Business Plan – Road Map To Success.