Balance sheets: the basics

A balance sheet shows a summary of what your business owns or is owed (assets) and what it owes (liabilities) at a particular date.

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Limited companies and limited liability partnerships must produce a balance sheet as part of their annual accounts for submission to Companies House, HM Revenue & Customs and shareholders.

A balance sheet must include:

  • fixed assets - long-term possessions
  • current assets - short-term possessions
  • current liabilities - what the business owes and must repay in the short term
  • long-term liabilities - including owner's or shareholders' capital

A balance sheet can also be used as a tool to help you analyse and improve the management of your business. For example, you can look at:

  • internal and external comparisons
  • trade debtors comparisons
  • borrowing as a percentage of overall financing

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