Every company must be familiar with the balance sheet financial statements. Especially in every accounting cycle of a company.
The balance sheet is a systematic report on the series of company financial reporting in each company’s accounting cycle. In making a balance sheet, there are important company data related to company transactions.
At the end of a company’s accounting cycle, the balance sheet becomes a guide that states how the company has performed during the last period.
From the balance sheet, various data can be seen, such as whether the company suffered a loss or not, which products were most favored by the market and which were not favored by the market. So that it can be an evaluation of the company.
What Is Balance Sheet?
The company’s balance sheet is a systematic report concerning the assets, debts and capital of a company in a certain period.
In the balance sheet there are company resources or company assets, economic liabilities or debt, share capital and the relationship between these items.
In other words, the company’s balance sheet is a description of the company’s financial condition. Reading balance sheets in financial applications should be compared with previous periods for consideration.
It can also be compared with other companies in the same industry so that there is consideration for each other.
The balance sheet aims to show the financial position of a company at a certain period, usually at the time when the books are closed and the remainder is determined at the end of a fiscal year or calendar year.
In making a balance sheet, there should be no mistakes. Every transaction data and recorded assets must be recorded carefully so that there are no errors that result in company losses.
The Components in the Balance Sheet are
The following are some of the components that must be present when preparing a balance sheet statement:
Assets are assets owned by the company with future benefits, such as trucks, goods cars, cargo cars, office buildings, and others that are useful for the company. Assets consist of current assets and tangible fixed assets.
Obligations or liabilities consist of current liabilities and long-term debt (long term liabilities) owned by a company.
Capital or equity is the price of company assets owned by company owners. Capital can increase or decrease at any time. It depends on the owner of the company or investors.
The above components are important for the company. Assets in the company must always be controlled and maintained so that there are no losses that must be borne by the company.
Liability should also be carefully examined. If the debt owned by the company is higher than the capital or profit, the company can go bankrupt.
So is capital. In a company, capital must always be regulated so that it can still finance the company’s needs.
The balance sheet has several different forms, but the content and details in it are almost identical to each other. You only need to adjust to the type of company transaction and how many transactions occur in your business.
This will make it easier for you to choose which form of balance sheet is suitable for your type of company so that the process of making a trial balance is also easier.
1. Horizontal Balance Sheet
The balance sheet in the form of Horizontal is a form of financial statement that separates assets in the right position from liabilities in the left position.
If you want to create a report with a control form, then you need to separate the right and left sides. On the right side, you can fill with capital and liability accounts. While on the left side you can fill in an account that is included in the company’s asset category.
2. Vertical Balance Sheet
The vertical form of the balance sheet is a form that is arranged lengthwise downwards and the balance is placed on the side in the debit and credit columns.
Keep in mind that the company’s assets consist of current assets and long-term assets. Everything is entered into the column on the left side.
Current assets are company assets that can be converted into cash in one year or less. For example, cash, marketable securities, accounts receivable, inventory materials, etc.
While long-term assets are company assets that cannot be converted into money within one year or less. Examples are long-term investments, fixed assets, and intangible assets.
In the scoring form you created, for the asset account, separate the two current and non-current assets. To make it easier for you to record what assets or company assets are currently owned.
In addition to knowing more clearly what the company’s assets are, separating current and non-current assets can facilitate the process of making a company’s balance sheet. Start with the fastest liquid assets.
Then enter items for liabilities and equity. Remember, you must record every detail and nothing should be missed.
Long-term debt and the amount of capital owned by the company must be recorded in nominal detail so that there are no errors in the balance sheet.
Don’t forget to divide your obligations or liabilities into 2 parts, namely long-term liabilities and short-term liabilities.
Long-term liabilities are liabilities that mature at one point after one year. Meanwhile, short-term liabilities are liabilities that mature within one year and are listed in order of maturity date.
By writing in detail about the company’s liabilities, you can find out how much the company is dependent on for the next year and so on.
The company’s balance sheet reports use the following accounting equation:
Assets = Liabilities + Equity
Once calculated using these equations, pay attention to your balance sheet. whether balanced or not. If both sides of balance then there is no problem in the balance sheet of your company.
But if the trial balance is not balanced, then an error occurs in the company’s balance sheet reporting process. You have to re-examine the transactions that occurred and do a re-calculation so that the balance is balanced.
These errors can occur because of errors when entering accounts to the general ledger or from the general ledger to the balance sheet.
Applications for making complete financial statements include cash flow and profit and loss and others.
Currently accounting application can be easily accessed anywhere at any time that has been certified to ISO/IEC 27001 so that data security is guaranteed.
That is the explanation of the balance sheet which is a systematic report on the assets, liabilities and capital of a company in a certain period.
Hopefully the information above is useful for you guys.