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In the Philippines
Four Basic Financial Documents:
+ $ Assets
- $ Liabilities (Debts)
= $ Net Worth or Equity
The Balance Sheet
• Name -- What does this represent?
– Partnership, individual, combined
– Needs to be consistent over time
• Date -- This is as of what date?
• Listing of all assets and all liabilities
• Balances at the bottom of form
• Assets - Liabilities = Equity
Balance Sheet Preparation
Some Issues
• IDENTIFY clearly the person(s) or the business
entity being described
• SEPARATE the business assets and liabilities
from the personal
• Be CONSISTENT as to WHEN the Balance Sheet
is prepared
– at a minimum, prepare a net worth statement when your
accounting year ends
• Valuation of Assets -- costs and/or market
– recommend two column balance sheet
The Balance Sheet is the
Cornerstone to Financial
Management
Balance Sheet
Asset Types
• Current assets (<1 year)
– Consumed or converted to cash in 12 months
e.g. crops, market livestock, prepaid
expenses,cash, savings
• Intermediate (1-10 years)
– e.g. machinery, breeding livestock, equipment,
stocks, some buildings
• Long Term (>10 years)
– e.g. land, buildings, stocks
– Selling would typically decrease volume or
size of business
Asset Value Determination
Liabilities -- What you owe someone else (against what you own)
• Current Liabilities
– What you are scheduled to pay in the
next 12 months
– Unpaid bills, accrued interest, property
taxes
– Operating loans
– Principal payments on term debts to be
made in the next 12 months
Parts of the Balance Sheet
(Intermediate)
Liabilities -- What you owe to someone else (against what you own)
• Intermediate Liabilities
– What is scheduled to be paid in 1 to 10
years (subtract out the current position)
– Typically, machinery loans, breeding
livestock, special use buildings
– Match up to the intermediate assets
Parts of the Balance Sheet
(Long Term)
Liabilities -- What you owe to someone else (against what you own)
Assets Liabilities
Current Current
Intermediate Intermediate
• Retained Earnings
– from profits earned and retained in
business
1. Rented assets
1) Belong on landlord’s balance
sheet
2) Footnote on tenant’s
3) If payable, rent is short-term debt
Balance Sheet Specials
2. Growing Crops
1) Date sets the list
2) Winter Wheat
3) Value = Cost of variable inputs
Balance Sheet Specials
Calculated by:
+ $ Total assets @ Market Value basis
- $ Total Liabilities inc. Contingent Liabilities
- $ Retained Earnings (contributed Capital)
A Good Balance Sheet
1) One page summary
• Financial Position
• Trend Analysis
• Feeds Into the Income Statement
• Communication to Self
• Communicating with those outside
the business
• Needs Good Detail