We offer Bookkeeping Services to help clients secure a sound financial future.
A balance sheet is a “snap shot” of a company’s financial position at one moment – it can change the next day. That’s different from the Profit & Loss account which is a cumulative position over a period of time e.g. sales and costs for 12 months etc.
The balance sheet basically shows two sides (both must equal the other) – i.e. a) where the money has come from e.g. capital and short term borrowings and b) where the money has been spent e.g. long and short term assets. The capital position will change every year as profits/losses are added or deducted from the capital.
From these figures, various ratios can be applied which will tell the banker/investor of the strength of the company. That is, if the figures haven’t been window dressed. There’s a lot of interpretation involved!