Have you just become an entrepreneur and are therefore interested in accounting for your business? You are right ! Accounting not only makes it possible to manage the company, but also to analyze its performance and anticipate possible financial problems. Therefore it is essential to understand and have knowledge of company accounting documents. Among them, the accounting balance sheet, is often considered a complex document to read and prepare. Definitions.
What is an accounting balance sheet?
The balance sheet is a document that describes the financial health of a company at a particular point in time, usually at the end of the financial year. This is also a legal obligation in the context of the preparation of annual accounts and the tax return.
The accounting balance sheet is presented in the form of a table divided into two parts, one according to the company’s assets, that is to say its assets, and the other according to the company’s liabilities, that is to say her debt. .
How is the balance sheet useful?
The balance sheet is useful, including for the company’s managers, but also for investors and shareholders, who get an overview of the company’s financial position and assets. So the balance sheet is very useful for valuing the company, especially if you want to get a loan from a bank for example.
Similarly, you can calculate many ratios from the balance sheet. This is the issue of intermediate management balance (SIG) which makes it possible to check the net income of the company.
Finally, the balance sheet is also used by the tax administration because it allows you to determine the corporate tax base (IS) of your company.
Is it necessary to prepare an accounting report?
All companies (SAS, SASU, SARL, EURL, etc.) in principle must establish an accounting balance sheet every year. The same is true for individual entrepreneurs who must also prepare an account statement, if they have not chosen the micro-enterprise system.
When should you make a balance sheet?
The accounting balance sheet must be established at the end of the accounting year. The latter lasts 12 months, but does not necessarily follow a calendar year. Depending on the company’s operations, it may be more relevant for you to have an accounting year that runs for example from 1 June to 31 May.
In addition, each year you must approve your company’s annual accounts at a general meeting six months after the closing date of your accounting year. The annual accounts include the balance sheet, the income statement and an appendix. It is therefore important to prepare your company’s balance sheet before this date, as it must therefore be registered with the commercial court registry.
How do you make an accounting statement?
An accounting balance sheet can easily be set up using accounting software where you can enter all the accounting entries (sales and expenses) as you send your invoices, payments, etc. . So the balance sheet is prepared throughout the year. You can also do it yourself, but you can also delegate the work to an accountant.
How do you read a balance sheet?
To find out if your balance is correct, you need to make sure that the total assets equal the total liabilities. In fact, the balance sheet must be balanced, this means that it is correct.
As mentioned, an accounting balance sheet is complicated to read, so ratios or MIS must be used. The best known are working capital, working capital requirement and net cash flow, with the latter calculated by subtracting working capital from working capital requirement. If the net cash flow is negative, you need to find short term financing methods!
(Photo credit: iStock / Wirul Kengthankan)
2024-05-09 06:13:04
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