What is a balance sheet?
A balance sheet is an important document that shows the assets, liabilities and capital of an organisation at a given point in time. This sheet provides investors and stakeholders with a simple overview of what your company owns and owes, and the amount you and other shareholders have invested.
That’s the purpose of a balance sheet, and implicit in that is the fact that without balance sheets there is no easy to read, structured supply of information that can be used. Those with a relevant interest in the company, such as business owners, potential new partners or investors, accountants and directors, can use balance sheets to swiftly and accurately assess the financial health of the company. A business usually needs a balance sheet when it’s looking for investment, applying for a loan or a grant, or submitting tax returns.
What does a balance sheet include?
Assets – usually cash, funds in the company bank account, and equipment of value, such as computer hardware and office furniture. Basically, things the company owns.
Liabilities – money owed by the business. So, unpaid invoices, outstanding loans, building rent obligations, employees’ salaries. Basically, what the company owes.
Owners’ or Stockholders’ Equity – this is the owners’ claim (or the stockholder’s claim if the business is not solely owned by an individual) on the assets of the business. This might be investment into the company. For example, if the owner has invested £30,000 of his or her own money to start the business, this remains the owners’ equity.
This balance sheet template provides the basic layout and structure you’ll need to create a balance sheet and start organising the finances of your company.
Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.
Our free Learn with Start Up Loans courses opens in new window include:
- Entrepreneurship – from ideas to reality
- First steps in innovation and entrepreneurship opens in new window
- Entrepreneurial behaviour opens in new window
Plus free courses on finance and accounting, project management, and leadership.
Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.