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What is a balance sheet?

Welink Accountants

Welink Accountants

A balance sheet is a comprehensive report of a company’s financials. Put simply, it illustrates what the company owes as well as what it owns, and represents a general statement of the financial position of the company.


The basic formula

All balance sheets follow the same basic formula: assets = liabilities + equity. This formula represents the fact that what a company owns is the sum of its liabilities (for example: loans, rent, utilities, and other bills) and its equity, meaning the amount contributed by its investors or shareholders. It is imperative that the liabilities and equity be equal to the assets, so that the company’s financial position is comprehensively represented in the balance sheet and nothing is left out of the equation.

In this way, the basic formula is an indicator of the company’s financial health and is useful for keeping the company’s spending in check and understanding how spending contributes to the company’s assets.


The process

A balance sheet is ideally updated on a yearly basis, and who takes charge of it depends on the size of the company and whether it is publicly or privately owned. A small, private business will usually have its books kept by one of the owners or it will hire a bookkeeper, while a public company will have to reach out to a registered accountant as its financial records will be subject to much closer scrutiny and will have to answer to specific government regulations.


The use

In order to get a sense of how the company is performing financially, it is not sufficient to look at a single balance sheet in isolation as this fails to indicate meaningful insights about the progress of the company or its long-term trends. The evaluation of the company’s financial position is performed by comparing the current balance sheet with ones from previous years, and it can also be useful to compare a company’s balance sheets with those of other businesses in the same industry to be aware of the diversity of approaches and to feel out the competition.


The drawbacks

Although a balance sheet is useful in many ways, it falls short in that it is a static representation of the company’s financial situation over a limited period of time. This is why a company’s books are kept in three different types of financial statements: the balance sheet, the income statement, and the cash flow statement. Looking at all three of these statements will provide a better understanding of the company’s current financial standing and an idea of what it needs to work on in the future. 


Welink Accountants offers business owners a list of qualified accountant experts in their field, who have the experience and ability to create and manage balance sheets as well as the other financial statements the company needs to evaluate its financial situation on a yearly basis and to keep its books in an efficient manner. 

HM Finance Coaching Ltd 


HM Finance Coaching Ltd is an accounting firm located in Loanhead Scotland and is headed by Helen Monaghan, an accountant with over 20 years of experience in the industry. This firm provides a broad range of comprehensive financial management services ranging from business advisory, annual accounting, VAT and Corporation Tax returns to a more hands on approach of finance coaching, budgets, management accounts, KPI reporting, and forecasts. 


These professionals will provide you with high quality services to fulfill your taxation needs so you can focus on growing your business. At HM Finance Coaching Ltd, prices start from £149+VAT per month. 


Accountants (DR) Ltd


Accountants (DR) Ltd is an accounting and bookkeeping firm based in Erith UK. It is run by Ms Irina Dorina Roman. This firm is very customer focused and wishes to provide high quality, comprehensive services to its clients to help them focus on their missions and goals thanks to its team of highly qualified and experienced experts.


The company works with a variety of different businesses and industries, specialising in construction and transport, providing clear financial guidance. The firm works proactively to ensure all of its clients’ success. 


Tidal Accounting


Tidal accounting is an accounting firm based in Leeds and run by Chris Hopwood. The firm’s services range from annual accounting, compliance, and tax planning to a more hands-on approach to business advice, management accounts, and cloud software advice to help improve business efficiencies. 


This company offers personalised services to each of its clients to ensure success by meeting clients’ expectations and needs. Tidal Accounting offers cost effective yet bespoke solutions to help as many businesses as possible. 


UK Payrolls


UK Payrolls is an accounting firm owned by John Jelf and is based in Gloucester UK. John has many years of experience in the fields of accounting, bookkeeping, payroll processing, auto enrollment, company incorporation, and company compliance.


UK Payrolls works with individuals and companies of various sizes and from various industries. The firm can help with financial advice in mentoring startups to building strong financial foundations. 


MWA Accounting


MWA Accounting is an accounting firm based in Manchester UK providing full package accounting services to businesses ranging from startups to SMEs to large multinational corporations. MWA Accounting's specialties include Contractors, Freelancers, Food & Beverage, Marketing, Legal, and Professionals. The firm also excels in various areas of expertise including management reporting, payroll, VAT, tax planning and year-end accounts as well as Virtual FD & Consultancy roles.


This team of professionals takes every case with the same enthusiasm. Whether it's a personal tax return or a multimillion dollar deal, they do their best to find the best solutions for you.

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