finance-balance-sheet

> **Templates and analytical tools only - not personalized financial, tax, accounting, or legal advice.** Balance-sheet line classification, owner-equity sectioning, and basis (GAAP vs tax-basis vs cash-basis) materially change figures and how lenders / investors / IRS read them. Review with a CPA before sharing externally. # Finance - Balance Sheet Generate a Balance Sheet (Statement of Financial Position) as of a single date. Lenders, M&A buyers, and reasonable-salary defenses all require a B/S. ## Required inputs - **As-of date** (end-of-period snapshot) - **Jurisdiction** (US default; UK / EU / CA / AU / other use locally accepted formats - IFRS or local GAAP) - **Reporting basis**: **GAAP**, **tax basis**, **cash basis**, or **modified cash** - REQUIRED. Same business produces different B/S under each basis. - **Entity type**: sole proprietor, partnership, single-member LLC, multi-member LLC, S-corp, C-corp - equity section structure differs. - **Asset and liability balances** (see structure below) - **Owner contribution / draw / distribution history** for the period (impacts equity section) - **Prior-period comparison** (optional but recommended for variance flags) ## Reporting-basis distinction (CRITICAL) | Basis | Revenue / AR | Expense / AP | Inventory | Long-lived assets | |---|---|---|---|---| | **GAAP (accrual)** | AR recognized when earned | AP when incurred | At lower of cost or market; ASC 330 | Capitalized + depreciated; ASC 360 | | **Tax basis** | Per IRC; AR/AP recognized per cash vs accrual election | Per IRC | UNICAP §263A may apply | Per IRC §168 / §179 / §168(k); MACRS | | **Cash basis** | Recognized when cash received | Recognized when cash paid | Often capitalized only at sale | Capitalized; depreciated | | **Modified cash** | Mix - typically cash for services + accrual for inventory / AR | Mix | Accrual on inventory | Capitalized + depreciated | Lenders and SBA loans generally want GAAP or close-to-GAAP. Tax preparers want tax-basis. Buyers / DD typically request both. The B/S header MUST display `reporting_basis: <selected>`. ## Output structure (US GAAP / typical SMB layout) ``` BALANCE SHEET Jurisdiction: [SELECTED] [Entity legal name] reporting_basis: [SELECTED] As of: YYYY-MM-DD Generated: YYYY-MM-DD (in dollars, unless otherwise noted) ────────────────────────────────────────────────────────────────── ASSETS ────────────────────────────────────────────────────────────────── CURRENT ASSETS Cash and cash equivalents $XX,XXX Marketable securities $X,XXX Accounts receivable, net of allowance $XX,XXX Inventory $X,XXX Prepaid expenses $X,XXX Other current assets $X,XXX -------- TOTAL CURRENT ASSETS $XX,XXX NON-CURRENT ASSETS Property, plant & equipment (PP&E), at cost $XX,XXX Less: accumulated depreciation ($X,XXX) -------- Net PP&E $XX,XXX Intangible assets, net $X,XXX Goodwill $X,XXX Right-of-use lease assets (ASC 842) $X,XXX Other non-current assets $X,XXX -------- TOTAL NON-CURRENT ASSETS $XX,XXX ────────────────────────────────────────────────────────────────── TOTAL ASSETS $XXX,XXX ══════════════════════════════════════════════════════════════════ ────────────────────────────────────────────────────────────────── LIABILITIES ────────────────────────────────────────────────────────────────── CURRENT LIABILITIES Accounts payable $XX,XXX Accrued liabilities (wages, taxes, interest) $X,XXX Short-term debt and current portion of LTD $X,XXX Deferred revenue (current) $XX,XXX ← SaaS / annual prepay Sales tax payable $X,XXX Payroll taxes payable $X,XXX Operating lease liability (current, ASC 842) $X,XXX Other current liabilities $X,XXX -------- TOTAL CURRENT LIABILITIES $XX,XXX NON-CURRENT LIABILITIES Long-term debt $XX,XXX Deferred revenue (non-current) $X,XXX Operating lease liability (non-current) $X,XXX Deferred tax liabilities $X,XXX Other non-current liabilities $X,XXX -------- TOTAL NON-CURRENT LIABILITIES $XX,XXX ────────────────────────────────────────────────────────────────── TOTAL LIABILITIES $XXX,XXX ══════════════════════════════════════════════════════════════════ EQUITY (entity-specific - see below) ────────────────────────────────────────────────────────────────── Total equity (entity-specific structure) $XX,XXX ══════════════════════════════════════════════════════════════════ TOTAL LIABILITIES AND EQUITY $XXX,XXX ══════════════════════════════════════════════════════════════════ CHECK: Assets = Liabilities + Equity ✅ / ⚠ DIFF $X,XXX ``` ## Entity-specific equity structure ### Sole proprietor / single-member LLC (disregarded entity) ``` OWNER'S EQUITY Owner's capital, beginning of period $XX,XXX + Net income (loss) for the period $XX,XXX − Owner's draws ($XX,XXX) -------- Owner's capital, end of period $XX,XXX ``` > Owner draws are NOT an expense and do NOT appear on the P&L. They reduce equity directly. ### Partnership / multi-member LLC (taxed as partnership) ``` PARTNERS' CAPITAL Partner A capital, beginning $XX,XXX + Allocated profit (loss) $X,XXX − Withdrawals ($X,XXX) -------- Partner A capital, end $XX,XXX Partner B capital, end $XX,XXX -------- TOTAL PARTNERS' CAPITAL $XX,XXX ``` > Tracked by partner; supports K-1 capital account reporting (tax basis vs §704(b) basis). ### S-corp ``` SHAREHOLDERS' EQUITY Common stock, par value $X,XXX Additional paid-in capital $X,XXX Retained earnings (AAA - accumulated adjustments) $XX,XXX Distributions to shareholders ($XX,XXX) -------- TOTAL SHAREHOLDERS' EQUITY $XX,XXX ``` > S-corp distributions reduce **Accumulated Adjustments Account (AAA)**, not "draws." Excess over AAA = return of capital, then capital gain. See Form 1120-S Schedule M-2. > Shareholder basis is tracked separately on Form 7203 and is critical for distributing without recognizing gain. ### C-corp ``` STOCKHOLDERS' EQUITY Common stock, par value $X.XX, X,XXX shares issued and outstanding $X,XXX Preferred stock (if any) $X,XXX Additional paid-in capital $XX,XXX Retained earnings $XX,XXX Treasury stock ($X,XXX) Accumulated other comprehensive income (AOCI) $X,XXX -------- TOTAL STOCKHOLDERS' EQUITY $XX,XXX ``` > Dividends declared reduce retained earnings; treasury stock at cost. ### Single-member LLC (disregarded for tax) but may report on B/S Use sole-proprietor structure unless LLC has elected S-corp / C-corp tax treatment, in which case use that entity's structure. ## Common SMB B/S issues to watch - **Negative equity** - typical for early-stage businesses with accumulated losses or owner draws exceeding contributions. Lender red flag. - **Owner draws on the P&L** - sole prop / partnership / SMLLC owner draws should NOT be on the P&L. If they are, reclassify to equity. - **Personal credit-card debt for business purchases** - should be on the business B/S only if the business legally owes the debt; otherwise it's an owner contribution + business AP. - **PPP / SBA / EIDL loan balances** - long-term debt, often with deferred interest; verify terms. - **Lease obligations under ASC 842** - operating leases create both right-of-use asset AND lease liability on the B/S, even for SMBs (small-business exemption is limited). - **Inventory valuation** - FIFO vs LIFO vs weighted average; LCNRV impairment under ASC 330. Affects both B/S and COGS. - **Goodwill / intangibles from acquisition** - required testing under ASC 350; private companies may elect amortization simplification. - **Deferred revenue (ASC 606)** - annual prepay creates a liability; B/S without this overstates equity for SaaS. - **Related-party balances** - owner loans to/from the business should be separately presented. ## Liquidity and leverage ratios After producing the B/S, compute and present: ``` LIQUIDITY Working capital = Current assets − Current liabilities Current ratio = Current assets / Current liabilities (target > 1.5) Quick ratio = (Cash + AR + securities) / Current liab (target > 1.0) LEVERAGE Debt-to-equity = Total liabilities / Total equity Debt-to-assets = Total liabilities / Total assets Interest coverage = EBIT / Interest expense (lender covenant) EFFICIENCY (from B/S + P&L) Days Sales Outstanding (DSO) = (AR / Revenue) × Days Days Inventory Outstanding (DIO) = (Inventory / COGS) × Days Days Payable Outstanding (DPO) = (AP / COGS) × Days Cash Conversion Cycle = DSO + DIO − DPO ``` ## GAAP vs tax-basis flag When the user requests a tax-basis B/S (e.g., to match Form 1065 / 1120-S Schedule L), explicitly note: - Depreciation method may differ (MACRS vs straight-line) - Inventory may follow §263A UNICAP rules - Bad-debt reserves typically not reported (tax-basis writes off only when worthless) - Deferred tax liabilities generally not shown - Owner-employee benefits (S-corp >2% shareholder health insurance) reported differently ## Workflow 1. Confirm as-of date, jurisdiction, reporting basis, entity type. 2. Collect asset, liability, and equity balances (with prior-period if comparing). 3. Build asset / liability / equity sections per entity-specific structure. 4. Verify Assets = Liabilities + Equity (flag any imbalance for investigation). 5. Compute liquidity and leverage ratios. 6. Flag SMB-typical issues (deferred rev, leases, owner draws, etc.). 7. Output B/S + ratios + observations with disclaimer footer. 8. Offer to save to `balance-sheet-<as-of>.md` in the workspace. --- > _**Templates and analytical tools only - not personalized financial, tax, accounting, or legal advice.** Generated [DATE]. Jurisdiction: [SELECTED]. reporting_basis: [SELECTED]. Entity-specific equity structure must match the entity type; GAAP / tax-basis / cash-basis / modified-cash bases produce materially different statements. ASC 606 deferred revenue, ASC 842 leases, and ASC 350 goodwill testing apply on accrual / GAAP B/S. Review with a qualified CPA before sharing externally with lenders, investors, M&A counterparties, or the IRS. Wayland and the plugin authors disclaim all liability for use of these templates._