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):
|Current Assets:||Current Liabilities:|
|Cash in Bank||Accounts Payable|
|Petty Cash||Vacation Payable|
|Net Cash||EI Payable|
|Accounts Receivable||Federal Income Tax Payable|
|Prepaid Insurance||Total Canada Customs & Revenue|
|Total Current Assets||WCB Payable|
|Fixed Assets:||Union Dues Payable|
|Less Depreciation||GST Charged on Sales|
|Net Land & Buildings||GST Paid on Purchases|
|Equipment||Total Current Liabilities|
|Net Equipment||Long-Term Liabilities|
|Total Long-Term Liabilities|
|Owner's Equity - Capital|
|Owner - Draws|
|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.