Definition
A balance sheet is a snapshot of a company’s finances on the last day of its financial year. It lists what the company owns (assets), what it owes (liabilities) and the capital and reserves that belong to its shareholders. Net assets always equal capital and reserves, which is why it balances. For a micro-entity, the balance sheet is currently the main statement filed at Companies House.
The main sections
- Fixed assets: items kept for long-term use, such as equipment or property.
- Current assets: cash at bank, money owed by customers and stock.
- Creditors: amounts owed, split between those due within one year and after more than one year.
- Capital and reserves: share capital plus the profits kept in the company.
A short example
ABC Design Ltd has £18,000 in the bank and is owed £2,000 by customers. It owes £6,000, mostly Corporation Tax. Its net assets are £14,000, matched by £100 of share capital and £13,900 of retained profits.
Signing and publication
A director signs the balance sheet on behalf of the board, with their name printed, and any exemption statements appear above the signature. The filed balance sheet is public. To read your balance sheet line by line, use the guide written for company directors.
Related questions
- How do I read my company's balance sheet? Start with assets, deduct liabilities to reach net assets, then check they equal capital and reserves.
- What is the difference between a balance sheet and a profit and loss account? The balance sheet shows the position on one date, while the profit and loss account covers income and costs for the whole year.
Related terms
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Share capital
Share capital is the amount shareholders have paid, or agreed to pay, a company for their shares, recorded at the shares' nominal (face) value.
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Called up share capital not paid
Called up share capital not paid is a balance sheet line showing share capital that shareholders owe the company but have not yet paid.
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Retained earnings
Retained earnings are the profits a company has built up since it started, after Corporation Tax, less all the dividends it has paid.
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Profit and loss account
The profit and loss account (P&L, also called the income statement) shows a company's income, costs and resulting profit or loss for its financial year…
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Micro-entity accounts
Micro-entity accounts are the simplified annual accounts that a company qualifying as a micro-entity can prepare under the accounting standard FRS 105.
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