Where can you find a balance sheet?

Balance sheet

What is a balance sheet and what is a balance sheet used for?

The Balance sheet is the comparison of the assets and the capital assets of a company on a specific reference date. In addition to the income statement (P&L), the balance sheet is the main component of an annual financial statement. It forms the accounting overview of all the assets of a company as well as the origin of the capital.
The basis is the inventory (= the assets, debts and net worth).

Double-entry bookkeeping: assets and liabilities

In contrast to the inventory, the balance sheet only contains the values ​​in the respective currency and no quantities. In order to comply with the double-entry bookkeeping system, the balance sheet is divided into ASSETS (= assets / use of funds) and LIABILITIES (= equity and debt / source of funds).
It always applies that the value on the ACTIVE side corresponds to the value on the PASSIVE side.
The sum of the ACTIVE side is called the balance sheet total. In a correctly prepared calculation, it corresponds exactly to the sum of the PASSIVE side. The structure of the balance sheet is specified in Section 266 of the Commercial Code (HGB).

When is a balance sheet drawn up?

The rules for preparing the balance sheet are laid down in the Commercial Code (HGB). Whether the preparation of a balance sheet is mandatory depends on how high the turnover and profit are and whether the company is entered in the commercial register. For small businesses, an income surplus invoice (EÜR) is sufficient. If the profit is below 17,500 euros, even this is not necessary. Freelancers are also not obliged to make an accounting.

When is a balance necessary?

When starting an economic activity, every businessman or every company is obliged to prepare an opening balance sheet at the beginning of the financial year. In addition, a closing balance sheet must be drawn up after the end of the financial year. This is also part of the annual financial statements and must be signed by the managing director.

Where can I see the balance sheet?

All companies that are obliged to keep accounts must publish their balance sheet with the annual financial statements. In the electronic Federal Gazette or the electronic company register, it is possible to view the annual financial statements of various companies. This gives everyone the opportunity to compare companies based on their financial situation. This is particularly advantageous for customers or lenders to find out whether a collaboration is worthwhile.

What is the golden rule of accounting?

The purpose of the golden rule of the balance sheet is to keep the financing costs for the capital as low as possible. It states that long-term assets, fixed assets, can also be financed over the long term. The reallocated assets should be financed by short-term assets. The cost of long-term borrowing is lower than that of a short-term loan. In return, a short-term loan is more flexible, so that there is no long-term commitment to a loan. This means that there is a congruence of deadlines between the capital commitment and the provision of capital for assets and liabilities. If the ratio of equity to fixed assets is equal to or greater than one, then there is long-term financing.

Changes in the balance sheet

In the case of an asset swap, two balance sheet items change on the asset side. There is an increase and a decrease on two active accounts. With passive swaps, the same thing only happens on the passive side and with passive accounts. On the other hand, both sides of the balance sheet change with the increase in assets and liabilities. A balance sheet item increases on the asset and liability side. The asset / liability reduction is the same, only with decreasing balance sheet values.

The functions of the balance sheet

The statement provides three different functions for the company and for parties related to the company:

Documentation function:
The list shows the existing assets and capital of the company (but without the hidden reserves). By holding on to the assets, it becomes significant evidence under commercial and tax law of the transactions carried out by the company - they are thus verifiable. The statement therefore represents the formal conclusion of the bookkeeping.

Profit determination function:
To determine the profit or loss of a fiscal year, the equity at the beginning of the fiscal year is compared with the equity at the end of the fiscal year. The difference - adjusted for deposits or withdrawals - then shows the amount of profit or loss in the corresponding financial year. How the respective profit or loss came about can be seen more precisely in the profit and loss account (P&L).

Information function:
The information function of the list serves on the one hand as self-information and on the other hand as third-party information. The aim of self-information is to give the businessman specific information about the success of his corporate management. For interested third parties (in particular banks, investors, supervisory authorities, tax authorities, employees, ...) the balance sheet offers these interested parties specific information on the success of the company and, associated with this, a basis for decision-making on how to deal with the company in the future.

There is room for maneuver in every list due to various legal requirements. There is no such thing as a “perfect” balance sheet, and no list will perfectly fulfill all three functions. The balance sheet is therefore not an absolute measure for judging a company.