A balance sheet is an important financial statement prepared by a company at a specific period in regular interval to showcase its financial position.
It includes assets, liabilities, owner’s equity, total debt etc.
P&L or say profit & loss report present the total income and expense of a business in a particular or specific period. It also carries much of importance like a balance sheet. It includes total sales, cost of goods sold, operating expenses etc. It helps to find out the net profit of a business.
First, let’s find out the importance of preparing reports and then we will jump to the easiest way of preparing these reports.
Why reports should be prepared in a business?
A balance sheet is the main point interest for a shareholder, company advisor, business partner etc.
Now lets’ find out the best & easy way to prepare a balance sheet and P&L …
Balance sheet and P&L can be prepared in two ways both manually and automatically by using accounting software.
As we are supposed to discuss the easiest & quickest way of report preparation, so let’s first step into this method:
Here I would like to suggest all business owners to start using accounting software, which incorporated all business report preparation. The best accounting software for easy GST accounting and automated preparation of all business & tax related reports.
Here is the step by step procedure to prepare a balance sheet and P&L reports using SlickAccount in just a second:
This way you will get you all business reports quickly also it will diminish human error chances.
Here is the detail procedure of preparing a balance sheet and P&L manually but it will be time-consuming and a little bit complicated.
The Balance sheet abides by the following rule: Assets = Liability + Shareholder’s Equity
In the balance sheet, total asset is divided into two parts i.e. current & non-current assets. Current assets are cash, bank & trade receivables while non-current assets are fixed assets like depreciation etc.
Same as asset current liabilities are: Short-term loans, Salary payable, rent payable, taxes, any credit card payments etc. Non-current liabilities include capital, reserve & surplus, long-term loans, bonds payable etc.
To prepare a balance sheet you will need all accounting details of assets, liabilities, and owner’s equity. So get all the details from your accounting books and calculate the value of each.
You or your accountant need to calculate the total amount of assets, liabilities, equity with the help of accounting records to prepare the balance sheet.
To calculate total equity use this formula; Owner’s Equity = Assets – Liabilities
Equity should be always positive as it shows the value of a company’s capital. If in any case, it will be negative then it’s very harmful to a business as getting finance will be almost negligible with negative capital worth. Equity can also include opening balance, dividend, stock, retained earnings, owners drawings etc.
After reckoning all value you need to put in respective figures in the correct field to prepare a balance sheet. Here is a sample of the balance sheet:
P&L statement also needed at the time tax return filing. A projected P&L statement is required to show company profit earning capability or future earnings at the time of funding.
Information required at the time preparation:
Step by step process
Both balance sheet and P&L statement are vital for business as one depicts the financial health and other one shows total income in a specific period. P&L statement helps to keep an eye on business finance in order to frame new strategies for better improvement. SlickAccount is the best accounting software and a business owner can get all business & tax related reports from this software. It’s easy to use & seamless cloud accounting software in India.