A balance sheet is practically indispensable for preparing annual accounts. It gives you a better insight into the current financial situation of your company. A balance sheet is an overview of all assets, debts and equity of the company.
- What is a balance?
A balance sheet is a concrete overview of your assets, liabilities and equity at a specific time.
The balance is therefore mainly a snapshot; This gives you a clear picture of the financial position of the company at that time and whether you have positive or negative equity.
Types of investments
In addition, you can see from the balance which investments you have made in the past period and – more importantly – how you financed these expenses.
Starting a business often costs money in addition to energy. As a starting entrepreneur you often have to invest in many things.
- Investments in relevant business assets (computer equipment, company car, etc.)
- Renting or buying a suitable business location
- Developing a good corporate identity (or having it developed)
You will of course also see this type of investment in the balance sheet. It is important to keep in mind that a balance should in fact always be in balance.
That is, the amounts on both sides must add up to the same amount.
On the left side (the assets side, also called the debit side) you name your assets. For example, you should think of money, goods or debtors.
The right side of the column (the liabilities side, also known as the credit side) is reserved for the debts incurred.
These are divided into long-term loan capital (loans with a term of more than one year) and short-term loan capital (loans with a maximum term of one year), plus your equity.
- What is the difference between fixed and current assets?
- Fixed assets are balance sheet items of the capital goods that last more than one production process or year, such as land and sites, buildings, automobiles, computer equipment and inventory.
- Current assets are – as the name suggests – capital goods that last only one production process or even less.
This includes, for example, stock, but also raw materials, possible receivables, debtors and cash.
- What is the difference between equity, long-term loan and short-term loan capital?
The equity literally stands for the amount that you, as an entrepreneur, have invested in your company in the past period.
You have to report the so-called long-term loan separately, because this concerns a loan or mortgage with a term of one year or longer.
The short-term loan capital, in turn, applies to short-term debts, such as salaries for any employees or the payment of tax .
- How long is a balance valid?
As mentioned, a balance is a snapshot. As soon as you make a new purchase or deliver a product or service to a new customer , this will have consequences for the balance.