Balance Sheet

Balance Sheet
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While the Trading, Profit and Loss Accounts show the current financial status of a business, the Balance Sheets are more a true financial account of a business:

The Balance sheet requires a proper understanding of firstly depreciation, this is an accounting concept used to show the declining value of assets. The Basic calculation is the total value of an assets which then depreciates in total value over a time frame of say 5, 10,15, 20 or 25 years. Each year the depreciation figure is shown in the profit and loss as an expense to offset taxation, whilst it also depreciates in value on the balance sheet.

Once a Trading Profit and Loss Account , and Balance Sheet data has been generated the next step would be to use Ratio Analysis.

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