Profit And Loss And Balance Sheets Page 7
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26Drawing Up A Balance Sheet
: Add up the (depreciated) value of all fixed assets (premises, machinery, equipment)
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and enter the figure on the balance sheet. As part of this procedure, you may want
to list the fixed assets owned by the organisation and enter their individual values
on an ’asset register’.
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: You may wish to enter the value of these assets at the start of the year and deduct
depreciation to create a ’net asset value’.
: Add up the value of all current assets (cash, stock, work in progress and debtors)
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and enter the figure on the balance sheet.
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: Add up the value of all liabilities (loans, overdraft, creditors). Don’t forget to include
any tax owed.
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: Subtract the value of liabilities from current assets. This gives you a figure for
’net current assets’ which is a useful measure of just how secure the organisation
is financially. If all your debts fell due immediately, could you raise enough money
by using your current assets.
: Add the fixed assets to net current assets to create a figure for ’total net
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assets’. If the final figure is positive, the organisation is ’solvent’. If negative,
the organisation is ’insolvent’.
: Now draw up a statement of where the total net assets have come from.
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This would include:
Money invested at the start of the business
Grants and loans made when the business started (their full value)
Reserves (profits kept in the organisation year after year)
Profit (or loss) this year
What Can The Balance Sheet Tell You?
A balance sheet can tell you how much the business or organisation is worth. For
community-based organisations it also can tell you how much the community has
increased the assets under its control and therefore how powerful or healthy it is.
This can only ever be a ’general’ figure, showing the underlying value of the funds
in the organisation at that particular time. No-one can safely predict the future. But
compared with previous years it is a simple measure of performance.
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Parent category: Business