The balance sheet: take a snapshot of your business's financial condition by building a balance sheet. (Small-Business Series Part Five)

THE BALANCE SHEET

If you're in business for yourself, you'll eventually need a balance sheet. Perhaps you want to apply for a loan and the bank requires a balance sheet as part of the application. Or may be you've decided to sell your business and you want some idea of its worth. Or perhaps you realize that a balance sheet can help you gauge your business's financial strengths and weaknesses.

This installment of the Small-Business Series provides step-by-step instructions for constructing a balance sheet by using financial data from the hypothetical flower shop Today's Bouquets. (Although it's not necessary, you may wish to review the previous articles in this series they provide some background on the business.) The 1-2-3 and Symphony commands and functions described here are simple. The focus is on the accounting procedures and subsequent business decisions you'll make when constructing and analyzing your balance sheet.

STEP 1: Pick the "As-Of" Date

A balance sheet describes a business's assets and liabilities as of particular point in time. The point in time is usually the end of the month, quarter, or year. But don't let these conventions restrict you; you can choose any ate. The only requirement is that you pick a date for which you have fairly complete and accurate data. You should try to pick a date that's as close to today as you can get. By doing so, your balance sheet will provide a current picture of your business financial condition. Out-of-date balance sheets are like old photographs; because they don't depict current conditions, they have only sentimental value.

So let's assume that it's December 31, 1988, and you've decided to construct a year-end balance sheet for Today's Bouquets. As a prelude to this event, you've stacked every piece of financial documentation that's applicable to 1988 on your desk.

Take a look at rows 1 through 3 of figure 1. These rows contain the first entries you'll make in your balance sheet. They describe the company (Today's Bouquets), the worksheet (a balance sheet), and the "asof" dat (December 31, 1988). Before you enter these labels, set the following column widths: A-2, B-2, C-40. To set the width of column A, move the pointer to cell A1. Press slash, select Worksheet Column Set-Width (in Symphony press MENU, select Width Set), and enter 2. Follow the same process to set the widths of columns B and C. Then enter the labels shown in rows 1 through 3.

STEP 2: Counter Your Cash

In a balance sheet, you list the good news--your assets--first, and the first asset to list is cash. to obtain this figure, add up the cash balances you have in the business's checking and savings accounts, as well as any other cash the business is holding. Imagine that at Today's Bouquets you have, as of …