1.The Balance Sheet

The Balance Sheet shows the financial position of the company at a point in time specified in the report, for example, at the end of a month, and allows a comparison with the company's financial budget as included in the company's current business plan.

It expresses, in financial terms, the value of all the assets (what the company owns or has due to it) and all its liabilities (what the company owes to other enterprises or organisations) on a 'Going Concern' basis.

The assets are categorised into 'fixed' assets and 'current' assets. The fixed assets are those, such as machinery, which remain substantially the same from one year to the next and are amortised, or charged to the Profit and Loss Account, over the useful life of the asset. The current assets, on the other hand are those, such as stock and debtors, which are continually changing as transactions are made.

The liabilities are categorised similarly to current asset into 'current' liabilities and 'medium/long term' liabilities. The current liabilities include trade creditors, accrued charges, and current tax liabilities. They are netted off against current assets to provide the value of Working Capital. The medium/long term liabilities generally comprise loans from external sources and are included in the company's cash funding, along with the company's cash and bank balances.

The total of the assets less the liabilities plus or less the company's funding gives the net book worth of the company as a going concern and represents the investment made by the owners plus any profits which have been retained in the company to finance future trading and development.