Why is the balance sheet prepared?


Question by: Vania Marini | Last updated: December 25, 2021

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The balance sheet is an important accounting document because it allows you to keep the resources and financial situation of your business under control. Good use and interpretation of this document allows you to make decisions based on solid data.

What is the purpose of the reworking of the balance sheet?

The function of the balance sheet is to provide information on the company’s equity and financial performance. … The re-elaboration of the financial statements consists in a reclassification and re-aggregation of the balance sheet and income statement items for the purposes of the financial statement analysis.

How to balance the balance sheet?

☝ For the balance sheet, the general rule applies that assets and liabilities must always be in balance (assets = liabilities). In fact, there is talk of the assumption of a balanced budget.

Why is the balance sheet reclassified?

The reclassification makes it possible to express an opinion on the quality of the financial structure of the company. In fact, the balance sheet items are reclassified according to a financial criterion or both assets and liabilities are reclassified according to a decreasing liquidity criterion.

How to describe the balance sheet?

The balance sheet is an accounting document that includes the resources and obligations that the company has at any given time. Together with the income statement and the financial report, it constitutes the financial statements.

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What are the balance sheet items?

The financial statements are made up of the following balance sheet, income statement, cash flow statement and explanatory note documents. The difference is the value of the shareholders’ equity. …

What goes into the income statement?

The income statement includes income and expenses and allows you to calculate the amount of gains or losses at the end of the financial year. … The income statement is an accounting document that subtracts costs from revenues by showing the change in equity at the end of a period.

What is meant by total uses?

The set of all the means available to the company (at a given time) to carry out the economic activity is also defined as gross operating capital or capital invested by the company.

What are financial fixed assets?

Financial fixed assets consist of securities, shareholdings and credits that the company holds as a long-term investment and not for short-term speculative purposes, which on the contrary are included in the current assets of the balance sheet under item CIII of the balance sheet between the activities …

How is the reclassified value-added income statement made?

The reclassification of the value-added income statement – Studio Fazzini.

2425 cc, provides that the operational area contains three intermediate margins:

  1. the added value;
  2. EBITDA (gross operating margin), which is also called EBITDA (earnings before interests, taxes, depreciation and amortization);

How do you find the profit for the year in the balance sheet?

If the financial year ended with a profit, it is indicated in the right-hand section of the balance sheet: the profit increases the initial net capital.

How is total loans calculated?

The rigidity of the uses is calculated by: fixed assets divided by total uses multiplied by one hundred. The index measures how much of the assets are made up of fixed assets. The elasticity of loans is calculated by: current assets divided by total loans multiplied by one hundred.

How to detect in double entry?

The tool: the bill

  1. At least two annotations must be made at the same time.
  2. The annotations must be made in two or more accounts with divided or juxtaposed sections.
  3. The annotations must be made in opposite sections.
  4. The total of the values ​​recorded in Debit must equal the total of the values ​​in Credit.

What does it mean to reclassify a financial statement?

The reclassification of a balance sheet involves the grouping of the balance sheet items relating to the balance sheet and the income statement, in order to create numerical ratios (balance sheet indices) useful for analyzing the balance sheet itself, and therefore for the state of the company.

What is the purpose of reclassifying the financial statements?

The purpose of the reclassification of the income statement is to highlight partial results derived from the comparison between specific costs and revenues of certain management areas. These areas are: … – Extraordinary management / difference between extraordinary revenues and extraordinary costs); – Tax management (taxes).

What to put in the balance sheet and income statement?

The Income Statement expresses the difference between costs and revenues or tells us whether the business we are doing is profitable or not. The Balance Sheet, on the other hand, tells us how the company is financing its business and how the company has used that money.

How are financial assets valued?

Financial fixed assets are valued according to their cash value. Receivables are entered according to their presumed realizable value, corresponding to the nominal value, as there is currently no write-down to be made.

What are fixed assets and how are they classified?

Fixed assets, according to art. 2424-bis, are “the assets intended to be used on a long-term basis”. Many of the assets that are used in the company have a single or limited use in time. Instead, fixed assets remain active for a longer time, usually for several years.

How are financial fixed assets depreciated?


Fixed assets may be subject to write-downs, or to permanent losses in value. In this case, the devaluation will be borne entirely by the income statement in which this devaluation takes place. We have a plant worth 10,000, the corresponding accumulated depreciation of which is 6,000.

What is meant by balance between sources and uses?

We speak of a company’s equity balance when there are correct ratios between loans and sources of financing, optimal ratios between equity and third-party capital, appropriate ratios between fixed assets and current assets.

What is the rigidity of employment?

The opposite of the elasticity index is the stiffness index of loans, which is equal to the ratio between fixed assets and total loans. On the contrary, here the ability of the firm to cope with an unexpected liquidity requirement is proportional to the low percentage of the indicator.

What are the sources and what are the uses?

What are the sources, the uses of capital and the prospectus sources – uses. The sources of capital are the sources of origin of the capital, that is the share capital contributed by the shareholders, the loans and the credits granted to the company. Uses are the ways in which sources of capital are used.

Where does the profit go in the income statement?

In particular, if a PROFIT occurs, it must be recorded in the DARE section of the INCOME STATEMENT; since the latter is a result account and the profit or loss simply represents its balance, whenever the revenues are higher than the costs, the difference is entered in Debit, to “balance” …

What is the most precise definition of the characteristic management of the company?

In business administration, characteristic management is defined as the set of positive and negative income components connected to the typical economic activity carried out by the company. To give an example, the characteristic management of a pastry shop consists of the costs and revenues relating to the production of sweets.

Why is the income statement in a graduated form?

The accounting prospectus has a scalar form; internally, costs and revenues are grouped by management areas, in order to be able to calculate some intermediate results before obtaining the final economic result. .


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