Again, it’s nothing to do with acrobatics – but we liked the picture!!
The balance sheet is the second-most-important financial statement that an accounting system produces, after an income statement. A balance sheet reports on a business’s assets, liabilities, and reserves at a particular point in time
- The assets shown on a balance sheet are those items that are owned by the business, which have value and for which money was paid
- The liabilities shown on a balance sheet are those amounts that a business owes to other people, businesses, and government agencies
- Reserves are the amounts that the charity has generated over the lifetime of its existence
As long as you understand what assets and liabilities are, a balance sheet is easy to understand and interpret
What Are Reserves?
Reserves are that part of a charity’s unrestricted funds that is freely available to spend on any of the charity’s purposes. This definition excludes restricted income funds and endowment funds, although holding such funds may influence a charity’s reserves policy. Reserves will also normally exclude tangible fixed assets such as land, buildings and other assets held for the charity’s use. It also excludes amounts designated for essential future spending.
Reserves also exclude funds which have particular restrictions on how they can be used. Trustees should consider for what purpose restricted funds are held and how they are being used in order to identify those resources that are freely available to spend.
You can find out much more about Reserves here
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