• 5.Make a heading: ‘Provision for liabilities and charges’. Beneath it make a sub-heading ‘Taxation’. In the third column record the value of the provision for taxation and write against it: ‘Taxation’.
• 6.Make a subheading: ‘Shareholders’ funds’.
• 7.Underneath that make a subordinate sub-heading, ‘Authorised share capital’.
• 8.In the first cash column list the total authorised value of each class of share, annotating accordingly, e.g. ‘Preference shares of £1’, ‘Ordinary shares of £1’.
• 9.Total up this column and rule it off with a double line.
• 10.Make a sub-heading: ‘Issued share capital’. In the second column enter the total value of shares issued in each class of share capital, annotating each, e.g. ‘Preference shares of £1’, ‘Ordinary shares of £1’.
• 11.Total up this column.
• 12.Make a heading: ‘Capital and reserves’. In the second column, list the profit and loss account balance. Add the last two figures in the second column, i.e. total issued share capital and profit and loss account balance, and place the total in the third column. Add the last two figures in the third column to arrive at the second major total, which must balance with the first (total net assets). There is room for variation in the use of columns. It depends on how many items you need to deal with in each group. But the objectives are clarity and simplicity.

No ledger posting needed

The balance sheet is not a ledger account, so there is no ledger posting to do. We simply draw up a statement showing the balances left on the ledger after we have compiled the trading, profit and loss account. Using the trial balance on page 122 we will compile a balance sheet for internal use, that also meets the requirements of the Companies Act 1985 (Format 1).

Compiling a company balance sheet step by step

• 1.Make a heading: ‘Fixed assets’. Allocate three cash columns on the right of a sheet of paper, and head them ‘Cost’, ‘Less provision for depreciation’, and ‘Net book value’. Underneath, record the values for each fixed asset. Net book value means value after depreciation. On the left write against each the name of the asset concerned. Total up each column and cross cast (cross check).
• 2.Make a heading: ‘Current assets’. Enter in the second column the value of stock then write against it on the left: ‘Stock’. Beneath the figure enter the value of debtors, and write against it on the left: ‘Debtors’. In the second column list the values of the other current assets. On the left write against each the name of the current asset concerned. Total up this column.
• 3.Make a heading: ‘Less creditors’. In the first column list the values of creditors and accruals relating to this category. On the left, against each, write the names of each class, (i) ‘Amounts falling due within one year’ and ‘(ii) Accruals’. Total up this column. Place the total in the second column below the total for current assets.
• 4.Subtract the total current liabilities (creditors) from the total current assets. Place the total in the third column below the total net book value for fixed assets. You need to place it below the level of the last total because there is an important phrase to be written against this subtotal: ‘Net current assets’ (in other words ‘Working capital’). Add the two totals in the third column and write against that sum: ‘Total net assets’. If there were any long term creditors (falling due after one year), e.g debentures, we would now list them,

but in our data there are none.