PROJECTED BALANCE  SHEET INSTRUCTIONS
WHAT IS A BALANCE SHEET?  
The Balance Sheet is a financial statement that shows the financial position of the business as of a fixed date.  It is usually done at the close of an accounting period.  The Balance Sheet can be compared to a photograph.  It is a picture of what your business owns and owes at a particular given moment and will show you whether your financial position is strong or weak.  By regularly preparing this statement, you will be able to identify and analyze trends in the financial strength of your business and thus implement timely modifications.

ASSETS, LIABILITIES, AND NET WORTH  
All balance sheets are divided into three specific groups. The three are related in that at any given time, a business's assets equal the total contributions by its creditors and owners. They are defined as follows: 

   Assets = Anything your business owns that has monetary value
   Liabilities = Debts owed by the business to any of its creditors
   Net Worth (Capital) = An amount equal to the owner's equity

The relationship between the three divisions is simply illustrated in the following mathematical formula: 

			Assets - Liabilities = Net Worth

Examined as such, it becomes apparent that if a business possesses more assets than it owes to creditors, its net worth will be a positive.  Conversely, if the business owes more money to creditors than it possesses in assets, the net worth will be a negative.

CATEGORIES AND FORMAT 
The Balance Sheet must follow an accepted accounting format and must be divided into the three general areas: assets, liabilities, and net worth (or capital). The individual categories under each of the three areas are those developed in your chart of accounts. By following this format, anyone reading the Balance Sheet can readily interpret it.

					    BALANCE SHEET
EXPLANATION OF CATEGORIES

ASSETS:  Everything owned by or owed to your business that has cash value. 
1.   Current Assets: Assets that can be converted into cash within one year of the date on the Balance Sheet.
a.   Cash: Money you have on hand.  Include moneys not yet deposited. 
b.   Petty Cash: Money deposited to Petty Cash & not yet expended.
c.   Accounts Receivable: Money owed to you for sale of goods and/or services
Inventory: Raw materials, work in process and goods manufactured/purchased for resale
Short-Term Investments: Expected to be converted to cash within one year--Stocks, bonds, CDs.  List at lesser of cost or market value.
Prepaid Expenses: Goods or services purchased or rented prior to use (ex: rent, insurance, prepaid inventory purchases, etc.)
Long-Term Investments: Stocks, bonds, special savings accounts to be kept for at least 1 year.
 3.   Fixed Assets: Resources a business owns and does not intend for resale.
a.   Land: List at original purchase price.
b.   Buildings: List at cost less depreciation.
Equipment, Furniture, Autos/Vehicles: List at cost less depreciation. (Selling values of vehicles are determined by the current Blue Book values.) 
LIABILITIES:  What your business owes; claims by creditors on your assets.  
1.   Current Liabilities:  Those obligations payable within one operating cycle 
a.   Accounts Payable:  Obligations payable within one operating cycle
Notes Payable: Short-term notes; list the balance of principal due. Separately list the current portion of long-term debts.
c.   Interest Payable: Interest accrued on loans and credit
b.	Taxes Payable: Amounts estimated to have been incurred during the accounting period
e.   Payroll Accrual: Current Liabilities on salaries and wages
2.	Long-Term Liabilities: Outstanding balance less current portion due(business loans, mortgages, vehicle, etc)
NET WORTH: (Also called "Owner Equity"): The claims of the owner or owners on the assets of the business (Document according to the legal structure of your business.)
1.  Proprietorship or Partnership: Each owner's original investment plus earnings after   withdrawals
2.   Corporation: The sum of contributions by owners or stockholders plus earnings retained after paying dividends.

How Is a Projected Balance Sheet Different?
You have learned the basics about building a Balance Sheet.  In this part of your business plan, however, you are creating projected statements, so you will use your new knowledge to build a Projected Balance Sheet.  This means that you will be estimating to the best of your ability the assets, liabilities, and net worth of your business at a future given date.  The following information will help you figure out how to arrive at the numbers that you will input into your Projected Balance Sheet spreadsheet.  Scenario: Projected Balance for end of year one. 

	Category                           	How to Arrive at the Numbers
	Cash:			Amount shown for date on pro forma cash flow statement less amount you plan 
				to keep in petty cash
	Petty Cash:		Amount you plan to regularly keep in petty cash
	Accounts Receivable:	Earned revenues that you estimate will not have been collected at the
				projected date of the balance sheet; depends on invoicing policy
	Inventory:		Amount shown in inventory on your three-year income projection on projected
				balance sheet date
	Short-Term		Stocks, bonds, Cds that your company plans to have money invested in on date 		Investments:		of projected balance sheet. If this amount is not zero, the amount must be 					subtracted from the cash on hand.
	Prepaid Expense:		Amount you show expensed on Three-Year Income Projection for Cost of  
				Goods that will not have been received; also paid up insurance, etc.  (usually 					zero for projection)
	Long-Term		Same as Short-Term, only invested for longer period of time. If the amount  is 
	Investments:		not zero, subtract from Cash.
	Fixed Assets:		All land, buildings, vehicles, equipment that you list as having been purchased.  Land is listed at purchase price. All other fixed assets are listed at purchase price less any depreciation that has been taken + depreciation that will have been taken by projected date of this balance sheet. (See historical p&l's and three-year income projection)
	Accounts Payable:		Expenses you  plan to have incurred without paying by the date of the 					Projected Balance Sheet. (Frequently zero on projected balance sheet)
	Notes Payable:		If you plan to receive a loan, the amount of principal that will be paid off 
				in the next operating cycle (ex. - one year); use payment schedule
	Interest Payable:		Acrued interest on loans and credit; usually zero
	Taxes Payable:		By tax schedule, the amount you estimate that is owed for taxes, but that you do not show as having been paid on date of projection
	 Payroll Accrual:		Amount that you will owe your employees for salaries that you do not 
				show as having been paid on Three-Year Projection. (usually zero)
	Long-Term		Amount you will still owe on loans received less the amount you will pay off		Liabilities:		in the next operating cycle (Notes Payable)
	Net Worth:		Projected assets minus projected liabilities. (If you have done everything 					correctly, this amount will be equal to the net profits your company is projected 					to have made from day 1, plus or minus any investments or withdrawals by  owners. 
				Net worth is always divided proportionately among owners.