The Balance Sheet is the last of the financial statements that you need to include in the Financial Plan section of the business plan. The Balance Sheet presents a picture of your business' net worth at a particular point in time. It summarizes all the financial data about your business, breaking that data into 3 categories; assets, liabilities, and equity.
Some definitions first:
Assets are tangible objects of financial value that are owned by the company.
A liability is a debt owed to a creditor of the company.
Equity is the net difference when the total liabilities are subtracted from the total assets.
All accounts in your General Ledger are categorized as an asset, a liability or equity. The relationship between them is expressed in this equation: Assets = Liabilities + Equity.
For the purposes of your business plan, you'll be creating a pro forma Balance Sheet intended to summarize the information in the Income Statement and Cash Flow Projections. Normally a business prepares a Balance Sheet once a year.
Here is a template for a Balance Sheet that you can use for your business plan (or later on when your business is up and running):
YOUR COMPANY NAME
BALANCE SHEET As At __________ (Date)
ASSETS
Current Assets
Cash in Bank
Petty Cash
Net Cash
Inventory
Accounts Receivable
Prepaid Insurance
Total Current Assets
Fixed Assets
Land
Buildings
Less Depreciation
Net Land & Buildings
Equipment
Less Depreciation
Net Equipment
TOTAL ASSETS
LIABILITIES
Current Liabilities
Accounts Payable
Vacation Payable
EI Payable
CPP Payable
Federal Income Tax Payable
Total Canada Customs & Revenue
WCB Payable
Pension Payable
Union Dues Payable
Medical Payable
PST Payable
GST Charged on Sales
GST Paid on Purchases
GST Owing
Total Current Liabilities
Long-Term Liabilities
Long-Term Loans
Mortgage
Total Long-Term Liabilities
TOTAL LIABILITIES
EQUITY
EARNINGS
Owner's Equity - Capital
Owner - Draws
Retained Earnings
Current Earnings
Total Earnings
TOTAL EQUITY
LIABILITIES AND EQUITY
Once again, this template is an example of the different categories of assets and liabilities that may apply to your business. The Balance Sheet will reproduce the accounts you have set up in your General Ledger. You may need to modify the categories in the Balance Sheet template above to suit your own business.
Once you have your Balance Sheet completed, you're ready to write a brief analysis of each of the three financial statements. When you're writing these analysis paragraphs, you want to keep them short and cover the highlights, rather than writing an in-depth analysis. The two Financial Plan samples in the sidebar (under "Elsewhere On The Web") will show you what these analyses will look like. The financial statements themselves (the Income Statement, Cash Flow Projections, and Balance Sheet) will be placed in your business plan's Appendices.
