A budgeted balance sheet shows the assets and liabilities of the company by the end of the year. Assets indicate the possessions of the company, and liabilities refer to what the company owes. Assets and liabilities are shown in individual pages in the final accounts and contain different items.
Assets can show items such as fixed assets, stock, accounts receivables, and liquid funds. Liabilities can be items such as equity, provisions, long-term and short-term debt.
In this way, the budget balance sheet expresses the company’s expected assets and liabilities by the end of the financial year. The budgeted balance sheet will give you an overview of what has been invested in your company and how the investments have been financed.
What is?
Fixed assets: A long-term value. It might be a building, a vehicle, a machine, or a trademark.
Stock: The total value of goods in the company. It might be raw materials, materials for construction, work in progress, finished goods, commercial goods etc.
Accounts receivables: A unit, company or person owing money to a creditor, who therefore is being owed money by the customer.
Liquid funds: The part of a company’s stock which is not tied up and therefore can be traded and sold. Also referred to as net disposable amount.
Equity: Value of the company once all debts have been deducted.
Provisions: An amount in the financial accounts reserved to cover for later liabilities.
Long-term debt: Debts with maturity period of one year or more. Might be mortgage loans and establishment loans taken out for example when investing in fixed assets.
Short-term debt: Debts maturing within one year. Might be creditor debts (supplier debt), VAT settlement or overdraft facilities with the bank settled by successive payments.
What do you use the budgeted balance sheet for?
The budgeted balance sheet can be used in many aspects, and it provides a broad insight into different parameters such as assets, debts, and equity in your company.
From the budgeted balance sheet, you get an overview of your company’s expected assets and debts by the end of the financial year.
The budgeted balance sheet is often covering a period of two years, which also allows your budgeted balance sheet to be included in a more long-term strategy. The budgeted balance sheet may also help you prepare for the future. You may choose to focus on the stock to assess whether is proportionate to future expectations.
If our stock needs to grow in the future due to increasing demand, it may be necessary to invest in a new fixed asset – such as a machine – to turn raw materials into finished goods.
This will require changes in the company assets, both stock as well as fixed assets, and for the fixed asset investment the level of depreciation must be considered.
In this way the budgeted balance sheet will help paint the picture of how the future of the company assets and liabilities will look.
What to remember when making a budgeted balance sheet
The budgeted balance sheet is a budget type that is closely related to other budgets in the company. It is important to emphasize that it cannot stand alone as you surely will need information for your budgeted balance sheet from for example the cashflow budget and your profit and loss accounts, also referred to as the operating budget.
It may be an advantage to have the budgeted balance sheet cover the same period as your profit and loss accounts, as the two types of budgets are closely related. The profit and loss accounts include the expected income and expenditure of the company. Preparing these two simultaneously will come naturally, as they are interdependent in many aspects.
Looking at the profit and loss accounts and the budgeted balance sheet, the two of them make an important indicator for consultants, lenders, potential investors, and of course yourself. The two budgets also form the basis of a preliminary VAT and tax calculation. So, the two types of budgets are closely related for several reasons.
The budgeted balance sheet is also closely related to the cashflow budget, as it indicates in which periods liquid funds are available and in which they are not.
As you might sense, there are many different factors you need to consider, when preparing your budgeted balance. If you want to make things easier for yourself, then please continue reading. We will now tell you how a data-driven budgeting tool may be of value to you.
Follow up on your budgeted balance sheet with InfoSuite
With a budgeting tool it is easy to automate large amounts of budget entries and make sure that you do not end up with a faulty budgeted balance sheet. We can help extracting all relevant data to your budget balance sheet, so you can avoid a lot of manual work.
You will also get rid of the hazardous work of comparing actual and budgeted figures when following up on your budgeted balance sheet. Through dashboards, reports, and analyses you can monitor your business on a day-to-day basis.
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