Yearly Balance Sheet Forecast
Projected Balance Sheet
|Opening||Year 1||Year 2||Year 3|
|Total current assets||$20,000||$69,705||$151,624||$238,213|
|Total fixed assets||$109,500||$87,600||$65,700||$43,800|
|Liabilities and equity|
|Current portion of long term debt||$7,639||$8,293||$9,004||$9,004|
|Total current liabilities||$7,639||$8,293||$9,004||$9,004|
|Long term debt|
|Total long term debt total||$37,686||$29,393||$20,389||$11,385|
|Total liabilities and equity||$129,500||$157,305||$217,324||$282,013|
For alot of people, the balance sheet is simply way too confusing. However, once you get an idea of how it flows, it becomes the easiest to understand. I’m going to take you through the entire process. First, the opening balance is what you start off with. That goes for cash, vehicles and anything else that will be used in your business. Generally, for start ups, you won’t have any acocunts payables or receivables because you haven’t start your business yet.
This item is taken from your cash flow statements. Take a look at the year 1 cash figures. It is $37,335. Go to the cash flow statement located here and look at the closing bank balance, it is $37,335. You will use those figures here.
This item is taken from your cash flow statements as closing inventory. This is the amount of inventory you have at years end.
Taken from your cash flow statements.
These are all your fixed, tangible assets you are using for your business. In this case, we are using:
– Office furniture; Under equipment
– Computer equipment: Under equipment
– Telephone equipment: Under equipment
– Leasehold improvements: Under leasehold improvements
– Vehicles – Vans (3); Under vehicles
– Cleaning equipment: Under equipment
– Legal: Under equipment
– Sign: Under equipment
List a cost for 1) Equipment; 2) Leasehold improvements ; And 3) Vehicle. In this example, our costs are as follows:
– Equipment: $42,000
– Leasehold improvements: $7,500
– Vehicle/s: $60,000
List these items as fixed assets. You may have more but try and keep it simple. If you can list items under equipment, or other categories, do it.
We’ve used a straight line depreciation method.
We didn’t use a salvage value for this example. You can and it will probably be more accurate but I personally don’t see the big deal. To figure out your depreciation for your fixed assets, simply take the total cost and divide it by the estimated life of the assets. Generally, 5 years is standard.
$109,250 / 5 years = $21,900
Depreciation is always accumulated so for the first year, take the base amount $21,900. For the second year, add another $21,900 and so on and so forth. Remember, deduct depreciation from the value of your fixed assets.
Add current and fixed assets
This is money you owe.
If you are purchasing your supplies on credit, you would post them here. In this example we are purchasing with cash. None needed here.
Current portion of long term debt:
This is our yearly payment for our bank loan. We will borrow $45,325 from the bank for our business loan. We have our amortization schedule here. If you are getting a business loan, your financial instituion should provide you one. Don’t have one? Simply go to this website here.
Now, in this case, we didn’t borrow any other money. However, you may have to for other assets.
For each of your large assets, type in the cost (loan amount), the length of the loan, and an interest rate (go to your banks interest rate calculator or call your bank, or go online). Once you get a figure, you can either add them together or split them up. In this case, we kept all assets together, for simplicity.
Business loan from bank:
Loan for vehicles:
Loan for equipment and other assets:
Add all of your prinicple payments up here.
This item will also be included on your cash flow statement as an outgoing cash item. See here.
Long term debt:
This is a little tricky, but easy once you understand it. This item is for your business loan/s. In our case, we will borrow $45,325 from the bank to get our operation going. This item will always be declining, after each year because we have to deduct our current potion of long term debt from this number. Example, in our opening balance, our bank loan is $37,686 because we deducted $7,639 (current portion of long term debt) from it. You will do this for all subsequent years.
You may get an amortization schedule from the bank or you can use an online calulator such as the one here. The interest will go into your cash flow.
Simply the amount of equity you put into the business. If you have 15,000 in cash and are going to use this for your business, it is considered equity. No, not a loan, this is unencumbered equity.
Other grants and contributions. If you are receiving a contribution from an orgnanization such as SBA, you will put that amount here. Any form of contribution goes here. Any shares also goes here.
Retained earnings. Simply that years net income plus the previous years net income. If you are paying out dividends, you will deduct them here.
Your total assets should balance out with total liabilities and equity. If they don’t balance out, go over the figures again. Make sure all loans and payments are accounted for. Also, check retained earnings.