Balance sheets: the basics

A balance sheet is a financial statement that provides a snapshot of your business at a given point in time. It is a summary of what your business owns or is owed – assets – and what it owes – liabilities – at a particular date.
There are three ways you can use a balance sheet:

For reporting purposes as part of a limited company’s annual accounts
To help you and other interested parties such as investors, creditors or shareholders to assess the worth of your business at a given moment
As a tool to help analyse and improve the management of your business

Self-employed people, partners and partnerships are not required to submit formal accounts and balance sheets on their tax return. However, the returns do require the relevant financial details to be entered in a set format, so you may find it beneficial to prepare the figures in a balance sheet format.
Other key benefits of producing a balance sheet:

Assisting bidding for large contracts, including public sector contracts
Produce formal accounts – including a balance sheet
To help you monitor the performance of your business

The balance sheet is most useful when it examined alongside profit and loss figures, as it provides the complete picture of your business. Using a balance sheet can help you to look at your business from a different perspective.