Company's Financial Accounting
Company's balance sheet
Balance Sheet of Finnish company. Tase
The balance sheet (in Finnish, tase) is one of the main documents of the annual report, which represents the indicators characterizing the property and financial position of the enterprise at the reporting date. Balance sheet is at least as useful as a profit & loss statement or cash flow statement!
The income statement lists the income and expenses for the financial year (other period) and it indicates whether the company has made profit or loss during the reporting period. It's a very useful report, but it doesn't tell you everything. It does not reveal the financial position of the company as a whole. The financial result may be good, but the company may be in debt to a very serious amount. The results of profit or loss (P&L) statement sometimes may be too optimistic or too pessimistic and the company's management can get a wrong understanding concerning the financial situation of the enterprise if they will use just the income statement in their analysis. It is necessary to look also at the balance sheet data.
The basic principle of the balance sheet is simple. The balance sheet of an enterprise always consists of two parts: active (assets) and passive (liability).
- the active part reflects all the property belonging to the company and the debt owed to it by other parties. It includes: intangible assets, fixed assets, inventories, cash in bank accounts and in turnover, as well as receivables
- the passive part reflects all the obligations of the company and the finance raised by it
In other words, it has two sides, one of them lists the company's assets (in Finnish, vastaavaa puoli) and the other shows how the assets are financed (in Finnish, vastattavaa puoli), through equity capital (in Finnish, oma pääoma) or debt capital (in Finnish, vieras pääoma). There are about two types of equity capital for small companies: entrepreneur’s / owner’s investments in the company and profits generated by the company. Debt capital may be, for example, bank loans, accounts payable, tax liabilities, wages payable and accrued expenses, which are deferred items for the next financial period.
Both sides of the balance sheet have to be equal to each other, so must have the same sum (balance)!
The balance shows the company's dependence from external and borrowed sources of financing, the situation in relations with suppliers and customers, the direction of investment activity and sources of its financing. A balance is an essential tool for all stakeholders who have any relationship with the organization or just plan to cooperate with it. Using the balance sheet, they can assess company's financial situation, get a picture of how well the business is going and determine whether bankruptcy can occur or not. Thus, it is useful and important document for:
- tax and statistical authorities
- banks (to analyze the creditworthiness of the borrower)
- shareholders (as a financial indicator of company's activity)
The balance sheet of the company may be evaluated as "good" with a stable financial condition if the following criterions are completed:
- the total value of the assets has increased
- the equity capital exceeds the debt capital
- the growth rate of equity capital is higher than the growth rate of the borrowed capital
- the share of equity in current assets is more than 10%
Company's balance sheet, free download template in Excel format
English, Russian and Finnish versions
| Name | File to download |
|---|---|
| Company's balance sheet | DOWNLOAD FREE |
| Бухгалтерский баланс | СКАЧАТЬ БЕСПЛАТНО |
| Yrityksen tase | LATAA ILMAISEKSI |