How do I create an economic balance sheet?
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A Balance Sheet is a snapshot of a company's financial position at a given point in time. The basic Balance Sheet equation is ASSETS = LIABILITIES. Broadly, the Assets are properties and other things of value which the company owns and claims against others; the Liabilities are the financial obligations of the company. In law, the company is a separate legal entity. Thus, for instance if A owns 100% of the shares of a company (a limited liability company), since the company is legally, a totally separate entity from A, A's shareholdings in the company, is a financial obligation of the company and is thus a liability of the company. So for the company (i.e. on the books of the company), the OWNER'S EQUITY is a liability to the company. On the books it is represented as a separate entity.  Thus, the balance sheet equation is written: ASSETS = LIABILITIES + OWNER'S EQUITY, i.e. A = L + OE.\n\nNow, OE has two elements, (i) CAPITAL --- essentially the funds which the shareholders inject into the company and (ii)RETAINED EARNINGS ----- these are funds which are retained in the company in lieu of being paid to the shareholders as dividends. The RE plus the dividends would be, at the end of an acounting period, the company earnings for that accounting period.  RE are cumulative, time period to time period. Of course, the company earnings are, in fact, a financial obligation of the company in favor of the shareholders. So if they are not paid to the shareholders at the end of the accounting period, i.e. if they are retained in the company, they are a liability to the company. So we get: A = L + OE becomes A = L + C + RE.  This is the basic balance sheet equation.\n\nNow, as said, the RE come from the EARNINGS (the INCOME). Basically, the INCOME is the difference between the REVENUES and EXPENSES. That is, INCOME = REVENUES - EXPENSES. This is, essentially, the Income Statement equation. Now, assuming no dividends paid, then RETAINED EARNINGS = REVENUES - EXPENSES.  Thus A = L + C + RE, where, NOTE, RE means retained earnings,  becomes:\n\n       A = L + C + R - E  i.e.\n\nAssets = Liabilities + Capital + Revenues - Expenses.\n\nNow this can be written, to make all signs in the equation positive:  A + E = L + C + R.  This is the combined Balance Sheet and Income Statement equation.  This equation shows the 5 basic types of accounts in Accounting. It also highlights something else. Expenses are handled, in the Ledger, as are Assets.  Capital and Revenue items are handled as are Liabilities.  "Handled" here refers to how the Dual Entry System of Accounting works. The basic concept which applies here is that for each transaction in which a company is involved, the total value of the DEBITS must equal the total value of the CREDITS. Now, in accounting, a DEBIT is nothing more than a left hand entry in a "T" account in the Ledger.  A CREDIT is nothing more than a right hand entry. That's it. No more, no less.\nNow, an increase in an asset is a debit, so dec. in asset is a credit, and a dec. in liability is a debit and an inc. in a liability is a credit.  So one merely has to remember one of these, e.g. an increase in an asset is a debit.\n\nNow, recall, expenses are handled as assets. So an increase in an expense is a debit.  Also capital accounts and revenues are handled as liabilities. So, an increase in a capital account or a revenue is a credit.\n\nThese are the principles employed to balance the books. The balanced books provide the numbers that are transferred to the Balance Sheet to the various Asset (Short term and Lond term Assets), Liability (Short term and Long term) and Capital items.  The asset items are normally set up on the left hand side of the bal. sht. and the liability and capital items on the right hand side, with liability items laid out above capital items.  For short and long term assets and liabilities, the short term items are laid out above the long term items. Any basic acco
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You need and entire financial budget (budget means future projection) generally going out at least 3 years done on a monthly basis. \n\nI hope you have some accounting skills or you may have a hard time following this.\n\nYour goal is to produce an income statement, balance sheet and cash flow statment all for a minimum of three years, if looking for a loan from a bank or venture capital firm, they may require even larger time periods like up to 8 years out. Although 3 should be good for most investors, banks and even yourself.\n\nThere will be several pages to this budget, I suggest creating it in microsoft excel. \n\nFirst part\n\nOk first page of your budget is the sales budget. For every item or service you offer list it with its estimated number of sales followed by selling price then multiply to get the total. \n\nSecond part\n\nList the variable costs associated with each service or product budget just like above. The budget above is the exact same but instead of using selling price use variable cost,(cost of goods sole if product business, cost of services render if service budget) the cost you pay per item u sell. This budget will allow you to get to gross profit on sales.\n\nThird part\n\nList the rest of your expenses in any order but broken up like this, Start up expense budget (lists equipment, land, building, patents, trademarks, incorporation fees, anything associated as an expense that would be paid before your doors open that is not a usual expense, rent would not go here), Labor budget (lists employee costs, including your own pay), Occupancy buget (all costs associated with the building in which you do business like rent, property tax, utilities, and maitenance), marketing budget (all advertising costs like cost of copies for fliers, or yellow page ad's), then your operating budget (depreciation and amortization expenses, other fees or expnses not listed anywhere else that you may have). Always try to stay on the conservative side with estimates and not a bad idea to make a miscellaneous espense account to offset some places you may have underestimated. NOTE be sure costs do not overlap in the product/service cost budget on any of the expense budgets.\n\nFourth part\n\nThen from there you make you income statment, balance sheet and chash flow statemnt after you have all the accounting data. \n\nFifth part\n\nThen the last part is to make a list of the assumptions you made in the budgets preperation, like the consistent month over month growth you estimated in sales. what is that estimate, in percent terms? \n\nSuggested sixth part\n\nAlso you could make and income statement bar chart (I suggest you do) to show income versus expenses the income should be stedily growing with time and the expenses whould be fairly constant, but also growing evenly as time gose by, this bars should not be jumpy from month to month, you would look crazy if anyone saw it. \n\nOther tips/pointers\n\n(read option 6th part for pointers too) Oh, usualy anticipate a loss for the first year (income can exceed expenses in a months twords the end of the year but so long as the total for all months in first year is a loss). people will thing you don't know what you are taking about if you think you are so hot you can turn a profit off the bat.\n\nThis process take lots of time because you need to reseach your expenses to get accurate estimates, but it is really worth it even if you are just using it for personal reasons and not looking for an investor or a bank loan.
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Use the help available in excel. They provide a detailed explanation with examples.
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you can go to http://www.balance-digital.com/manuals.htm to download the manual corresponding to your Notebook.
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Whatever price the current owner is asking for this business, he should be able to support with accurate financial data.\n\nAsk for the last 12 months of financial statements - Profit and Loss Statements, Balance Sheets, etc. Then pick a few months at random, and ask the owner for the supporting documentation (receipts, bank statements, invoices, check stubs, etc.). You will want to make sure that the financial statements are accurate.\n\nIf the owner of this business is unwilling or unable to provide you with this data, DO NOT BUY THIS BUSINESS.
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if interest is compounded daily, don't forget to...\n\n1.  divide 5.16% by 365 to get the daily rate\n2.  use 30 days as your period "n"\n3.  don't use the avg daily balance.  you must use the initial principal balance at the beginning of the 30 day period.\n\ni haven't worked it out, but if your formula is correct, the future value will work.\n\nif you have a business calculator (preferrably from HP)\n\nPV = initial principal balance\ni = 5.16% divided by 365 days\nn = 30 days\n\nsolve for FV
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If you're using software, there is often a 'canned' chart of accounts included.\n\nIf you do a search for 'sample chart of accounts', you'll find many examples - you should look for one that best fits your type of company\n\nWhat many people do, if your biz is not complicated, is just use say 1xxxx for assets, 2xxxx for liabilities, 3xxxx for equity, 4xxxx for revenues, 5xxxx for cost of goods sold, 6xxxx for expenses, 7xxxx for taxes, 8xxxx for other income/expense.\n\nIf you more or less follow the order in which things will appear on the financial statements, you can't go too far wrong
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Its not easy to provide every details here, it's just a birds eye view,simply in financial reporting you prepare entries than trial balance and than put those figures in income statement where you get net profit after that you go for final phase of preparing balance sheet in which you analyze assets,liabilities and owner's equity.For all of these and especially for NGO consult any financial accounting books for technical details and procedures.
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Hi,\n\nI don't understand your question.  What is it that you are trying to accomplish?  What error?  By classify do you mean put these particular items in a particular place on the balance sheet?  I need more information.
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The answer to your question is Compiere since it's open sourced and can be easily customizable to suite your needs.\n\nYou can fine Compiere from http://www.wareprise.com/content/accounting-software.html
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Do everything in all the answers given.\nPlus do yourself a favour.\nIt is tedious and takes effort but;\nMake a business plan. It is an organizational\nway to prepare yourself to open a business, and to \nsucceed, by taking all things into consideration.\nMany banks provide Business Planning Software. You just need to fill out the blanks.  Do not shelve all you paper work, follow your plan.
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I've uploaded a simple spreadsheet to the link below.  Anything else and you should probably find someone in the office who knows Excel.
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short answer, get MYOB and pre-select the business type, it will give you a complete chart of accounts applicable to that type of business.\n\nThere are some basic line items that every business will use, but in essence, you can, subject ot accounting standards and generally accepted accounting principles, create what you want.
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Click on this link to read about balance sheets.\nhttp://www.canadaone.com/ezine/nov01/balance_sheet.html
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refer to this notes \n\nhttp://www.futureaccountant.com/process-costing/
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Hey Dhruba, This is a good question and is in fact the topic of several entire books.  I recommend "Database System Concepts" by A Silbershatz, H Korth, and S Sudarshan.  As for the step by step Ill try and outline a few basics.\n\nFirst you are going to want to plan out your databases data structures, or schemas, you can consider these as objects.  For example if you were makeing a bank account database you might have a customer object and an account object.  In these objects you have information (attributes), say for customer you might have their name and address, while in account their account number and balance.\n\nNow typically you would use some kind of relation diagram to represend these two object and how they are related.  The entity relationship (ER) model is a common example.  The relation for our example could be "depositor".  Note that there are several other relationships between these two example entities (like say "withdraws from") and for any system of normal magnitude you will have several entities and relations that are far more complex.\n\nOnce you have your entire table layed out you can use a relational language such as SQL to code your entities and their relations creating a database ready for manipulation by whatever various front end language you wish to use.  Since you only asked about modelling I will stop here.  This is extremely simplified but if you want more details on any part I hope now you can ask more specific questions.  Another option of course it to read the book I suggested above, it will most likely be available at a local library.  Hope this helps and good luck.
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try for help on this site..\n\nhttp://www.futureaccountant.com/