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Download free ebooks at bookboon.com 24 Balance Sheet Managing Budgets 4. Balance Sheet
Now you’ve seen how the day-to-day recording of transactional information is recorded. But how do you
put it into a format that can help you see the financial state of the organization? Can you just look at the
budget and what has been spent in each category to this point in the year compared to what was intended
to be spent? That’s one way to do it, but there’s an easier way - this is where the Balance Sheet comes in.
It is a ‘snapshot’ of the finances of the business at one given time. The information given includes what
the business owns and what it owes.
There are three sections to the Balance Sheet: Assets – the items of value owned by the company Liabilities – the company’s obligations, whether to pay for or provide goods or services at a future
date Equity – remembering our equation from Chapter 2, equity is the amount of net assets (assets –
liabilities) A Balance Sheet gets its name from the fact that the total of the assets listed must equal the total of the
liabilities and equity – in other words, the two sides of the sheet must balance. For an example of a
Balance Sheet, see Figure 4. It’s a relatively simple example, since most businesses will have many more
accounts under their assets, liabilities, and equity categories on their Chart of Accounts. But you can get
the basic idea for how the information is shared via the Balance Sheet. 4.2 What a Balance Sheet Tells You
There is good information on the Balance Sheet, such as: A summary of the organization’s assets and the claims against those assets as of a specific date. Information about the organization’s current ability to pay its current debts. You can only tell at
the moment, for the liabilities...
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