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CHAPTER 12 - BALANCE SHEET PROJECTIONS

This is where lenders and investors will to look to find out what the equity and collateral of your company is going to be worth.

Assets
List anything of value that is owned or legally due the business. Total assets include all net values. These are the amounts derived when you subtract depreciation and amortization from the original costs of acquiring the assets.

Current Assets

  • Cash -- List 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 -- Includes 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 expected to be converted into cash within a year. List stocks and bonds, certificates of deposit and time-deposit savings accounts at either their costs or market value, whichever is less.
  • Prepaid expenses -- Goods, benefits or services a business buys or rents in advance. Examples are office supplies, insurance protection and floor space.
  • Long-term Investments -- Also called long-term assets, these are holdings the business intends to keep for at least a year and that typically yield interest or dividends. Included are stocks, bonds and savings accounts earmarked for special purposes.

Fixed Assets

Also called plant and equipment. Includes all resources a business owns or acquires for use in operations and not intended for resale. Fixed assets may be 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.
  • Buildings
  • Improvements (Including leasehold improvements)
  • Equipment
  • Furniture
  • Automobile/vehicles

Liabilities

Current Liabilities
List all debts, monetary obligations and claims payable within 12 months or within one cycle of operation. Typically they 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 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 by an accountant to have been incurred during the accounting period.
  • Payroll accrual -- Salaries and wages currently owed.

Long-term Liabilities
Notes payable -- List notes, contract payments or mortgage payments due over a period exceeding 12 months or one cycle of operation. They are listed by outstanding balance less the current position due.

Net Worth
Also called owner's equity, net worth is the claim of the owner(s) on the assets of the business. In a proprietorship or partnership, equity is each owner's original investment plus any earnings after withdrawals. In a corporation it is the capital investment paid for the issuance of stock, plus the surplus paid in by the principals, and the after tax retained earnings.

Total Liabilities and Net Worth
The sum of these two amounts must always match that for total assets.

The Balance Sheet Worksheet

Assets

  • Current Assets (Net Values)
  • Cash $
  • Petty cash $
  • Accounts receivable $
  • Inventory $
  • Short-term investment $
  • Prepaid expenses $
  • Long-term investments $
  • Fixed assets
  • Land $
  • Buildings $
  • Improvements $
  • Equipment $
  • Furniture $
  • Automobile/vehicles $
  • Other Assets
  • Total Assets $

Liabilities

  • Current Liabilities (within 12 months)
  • Accounts payable $
  • Notes payable $
  • Interest payable $
  • Taxes Payable
  • Federal income tax $
  • State income tax $
  • Self-employment tax $
  • Sales tax (SBE) $
  • Property tax $
  • Payroll accrual $
  • Long-term liabilities (over 12 months)
  • Notes payable $
  • Total Liabilities $
  • Net worth (owner equity) $
  • If Proprietorship or Partnership (name's) equity $
  • If Corporation Capital stock $
  • Surplus paid in $
  • Retained earnings $
  • Total Net Worth $
  • Total Liabilities and Total Net Worth $

(Total assets will always equal total liabilities and total net worth)

Workbook Main Menu I To Chapter 13

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