Friday, 19 July 2019

How to do a Balance Sheet For a Business Start-Up

A balance sheet is basically a statement of your financial position at a given time. It reports your assets (stock, machinery, cash, money owed to you) and liabilities (loans, money you owe) and net assets or equity of your business at a given point in time. In a lay man's way, a balance sheet shows you where a company's money came from, where it went, and where it is now.

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How to Control Money

To draw the start -up balance sheet you need to make two list to get Started. The first is your list of Current Assets. This are assets (things your business owns) which will be used up within the first year of doing business. Typically they include cash, inventory and prepaid  expenses (such as prepaid insurance). Although Accounts receivable is another example of a current asset, there are no accounts receivable in account start up. The second list is the Capital Assets. These are items you buy with the intention of keeping them and using them to run the business. For example, if you buy a vehicle to re-sell it, how ever, then that vehicle is inventory.

Forecasting Your Assets

A: Determine and Budget your Current Assets
Starting Cash (You must have enough to cover your start up expenses)
Starting Inventory
Prepaid Expenses
Other Current Assets
Total Current Assets (A)

B: Determine your Capital Asset needs
Machinery and equipment
Office Furnishing, Fixtures and Other Automobiles
Computer and data Processing Equipment
Leasehold Improvements
Tools and other assets
Computer Software ( Excluding System software)
Other Capital or Intangible Assets
Total Capital Assets (B)
Your Total Assets are A+B

Your second step is to determine how you are going to finance this total.

What combination of Dept and Equity will allow you to get your business started?

Forecasting your Liabilities and Equity

Now that you have an estimate of how much you need to get started, you must determine how best to finance your business start up.

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