Balance Sheet

#Balance sheet structure

The balance sheet organizes accounts into three sections:

Assets (what you own):

• Current assets: Cash, accounts receivable, inventory, prepaid expenses (recoverable within 12 months)
• Non-current assets: Fixed assets, intangible assets, long-term investments (held beyond 12 months)

Liabilities (what you owe):

• Current liabilities: Accounts payable, short-term debt, accrued expenses (due within 12 months)
• Non-current liabilities: Long-term debt, deferred tax liabilities, pension obligations (due beyond 12 months)

Equity (owners' stake):

• Share capital: Amount invested by shareholders
• Retained earnings: Accumulated profits not distributed as dividends
• Other comprehensive income: Unrealized gains/losses on certain items

The balance sheet always balances: Total Assets = Total Liabilities + Total Equity.

Good to know: The balance sheet is also called the statement of financial position or statement of financial condition.

#Accessing the balance sheet in Light

Generate your balance sheet:

1. Navigate to Planning & Reports → Reports
2. Select reporting date (must be month-end or year-end for standard reporting)
3. Select entities to include (single entity or consolidated)
4. Select currency (transaction, local, or group)
5. Click Generate

Light displays the balance sheet formatted by asset, liability, and equity classifications.

#Interpreting balance sheet accounts

Cash and equivalents: Available funds in bank accounts and highly liquid investments. Essential for operations and obligations.

Accounts receivable: Money owed by customers. Shown net of allowance for doubtful accounts.

Inventory: Goods held for sale or raw materials. Valued at cost or market value, whichever is lower.

Prepaid expenses: Payments made for future benefits (insurance, rent). Assets because you'll benefit from them.

Fixed assets: Buildings, equipment, vehicles, and land. Shown net of accumulated depreciation.

Intangible assets: Patents, trademarks, goodwill. Valuable but non-physical assets.

Accounts payable: Money owed to suppliers. Obligations that reduce net assets.

Accrued expenses: Expenses incurred but not yet paid (utilities, salaries). Recorded to match expenses to revenue.

Deferred revenue: Customer payments received but services not yet delivered. Liability because you owe performance.

Long-term debt: Loans and bonds due beyond 12 months. Shown with interest rate and maturity date.

Retained earnings: Cumulative profits retained in the business. Increases with profit, decreases with losses and dividends.

#Balance sheet analysis

Key metrics derived from the balance sheet:

Current ratio = Current Assets ÷ Current Liabilities

Shows ability to pay short-term obligations. A ratio > 1 indicates you have more current assets than current liabilities.

Quick ratio = (Current Assets - Inventory) ÷ Current Liabilities

A more conservative measure excluding inventory, which is less liquid.

Debt-to-equity ratio = Total Liabilities ÷ Total Equity

Indicates the proportion of debt versus equity financing. High ratios indicate more leverage and financial risk.

Return on assets (ROA) = Net Income ÷ Average Total Assets

Measures how efficiently you use assets to generate profit.

Light can calculate these ratios automatically. Configure in custom reports.

#Multi-period balance sheet analysis

Compare balance sheet to prior periods:

1. Navigate to Planning & Reports → Reports
2. Select periods to compare (current, prior year, budget)
3. Light displays accounts side-by-side with changes and variances
4. Click any account to drill into transactions

This helps identify significant balance sheet movements requiring investigation.

#Multi-entity balance sheets

For organizations with multiple entities:

• Generate entity-level balance sheets for each subsidiary or division
• Generate consolidated balance sheet combining all entities
• View inter-company balances (eliminated in consolidated reporting)
• Analyze balance sheet by entity type or geographic region

Light automatically eliminates inter-company transactions in consolidated reporting.

#Multi-currency balance sheets

Report your balance sheet in different currencies:

1. Navigate to Planning & Reports → Reports
2. Select Currency: Transaction, Local, or Group
3. Light displays amounts in your selected currency

For multinational companies with subsidiaries in different currencies:

• Each subsidiary's balance sheet appears in its local currency
• Consolidated balance sheet appears in group currency
• Light applies period-end exchange rates for currency translation

#Classified vs. unclassified balance sheets

Light supports both formats:

Classified balance sheet (standard format) organizes into current vs. non-current:

• Provides insight into liquidity
• Facilitates analysis of working capital
• Required for most external reporting

Unclassified balance sheet lists all accounts without classification:

• Used in some jurisdictions
• Shows raw account listing
• Less analytically useful

Select your preferred format in report settings.

#Fixed asset detail

The balance sheet's fixed asset section summarizes accumulated depreciation. View detailed fixed asset schedules:

1. Navigate to Planning & Reports → Reports
2. Shows cost, accumulated depreciation, and book value
3. Identifies assets by category (buildings, equipment, vehicles)
4. Lists depreciation method and remaining useful life
5. Identifies fully depreciated assets

This supports asset management and planning for replacements.

#Deferred tax balances

If your company recognizes deferred taxes:

1. Calculate deferred tax assets (future tax benefits from deductions)
2. Calculate deferred tax liabilities (future tax payments)
3. Show the net deferred tax position on the balance sheet
4. Maintain detailed schedules of timing differences

Light can automatically calculate deferred taxes. Configure deferred tax accounts in your chart of accounts.

#Off-balance-sheet items

Some obligations don't appear on the balance sheet but require disclosure:

• Operating leases (before adopting IFRS 16/ASC 842 which brought them on-balance-sheet)
• Contingent liabilities (possible but not probable)
• Commitments (contractual obligations)

Document these in balance sheet footnotes and supplementary schedules.

#Balance sheet footnotes

Comprehensive balance sheet reporting includes footnotes:

1. Accounting policies: Valuation methods and depreciation policies
2. Significant estimates: Judgments in calculating allowances and reserves
3. Contingencies: Potential liabilities or assets
4. Subsequent events: Items occurring after balance sheet date
5. Commitments: Contractual obligations

Light maintains a footnote library. Attach relevant footnotes to your balance sheet report.

#Quarterly vs. annual balance sheets

Generate balance sheets at any frequency:

Monthly: For management analysis and trend identification.

Quarterly: For investor reporting and SEC compliance (if public company).

Annual: For audited financial statements and regulatory filings.

Light maintains all historical balances, enabling easy generation at any frequency.

Tip: Always report balance sheets as of month-end or quarter-end dates. Mid-month balance sheets are not reliable due to incomplete transaction processing.

#Exporting balance sheet data

Export balance sheet for external distribution or analysis:

1. Generate the balance sheet report
2. Click Export
3. Select format: PDF, Excel, or CSV
4. Light generates formatted output ready for distribution

The balance sheet maintains your company branding and formatting in PDF format.

#Related articles

• Reporting overview
• Profit and loss
• Cash flow statement
• Trial balance
• Custom reports and filters