www.ebbemunk.dkBookkeeping and Farm Economics

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Chapter 3: Making out the Balance Sheet

In the balance sheet you enter all what you own, and all what you owe. The difference is called Net Capital. The Balance Sheet is an important part of the accounts, because errors influence directly on the period's result.

The Balance Sheet in the Accounts

To make regular accounts for a period is needed Balance Sheets at beginning and at end. In the Balance Sheets you enter all what you own, and all, what you owe. The difference is called net capital (or net debt, if negative)

The Balance Sheet is an important part of any accounts: you can make accounts containing only of two Balance Sheets plus information of how much money paid to the owner. Then you can calculate the profit in this way:

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In making out the Balance Sheet, you have several problems. What is the value of land, buildings, livestock, fertilizer in the fields, etc.?

• Be careful in making up the physical assets, the supposed value is directly influencing the surplus of the period
• Do use the identical principles at beginning and at end

Examples of errors in balance at end: The livestock is 10000 kroner too low, and stocks are 5000 kroner too low. The surplus from above will then be altered in this way:

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The surplus is lowered, because the assets are valued too low.

Another example: Error in both balance at beginning and balance at end. Value of livestock is 10000 kroner too low, and stocks are 5000 kroner too low.

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When you make the same error at beginning and at end, the surplus will be unchanged -- but the balances are still wrong.

• Take care when you make up the values in the balances. They influence the surplus directly
• Do use the same principles both at beginning and at end

If you make up the values in an inaccurate way, it may influence the single year's result essentially

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The figures in the balances at the end of one year and at beginning of the next year are identical. That gives coherence between the different years

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