Think of a balance sheet as a warehouse, where all your stocks and assets are held. Your stock count can change at any time when someone takes something out, or puts something in.
A balance sheet works the same way; it is a snapshot of an entity or your body corporate (BC) at the time of printing. It changes whenever we input an invoice or make a payment. In fact, whatever happens to the income and expenditure account changes the balance sheet.
The technical terms used in a balance sheet refers to your assets and liabilities.
This is something that is owned by the entity or BC.
Debtors: lot owners who owe money to the BC.
Cash at Bank: money that is currently held in the bank which belongs to the BC.
Investment Accounts: money which belongs to the BC currently held by a financial institution.
This is something that is owed to another entity by the BC.
Creditors: payments still to be made to suppliers for invoices that have been received and not yet paid.
Income Tax Provision: a provision for any income tax that is due to be paid to Australian Tax Office (ATO).
GST Clearing: the collection of GST that has been charged on invoices and/or levies minus the amount of GST that we have paid out on creditor invoices, that is yet to be paid to the ATO at the end of the relevant period.
A balance sheet should be looked at differently during the year than at the end of the year, as explained below.
If you look at a balance sheet throughout the year, you will see differences compared to the end of the year balance sheet. During the year the accounts below would normally be zero, but at the end of the year they would show a balance.
Prepaid Expenses: An example of prepaid expenses is: normally the insurance is paid up front for the following year, so this must be removed and then reappear in the next financial year.
Accrued Expenses: An example of accrued expenses is: where you know that a plumber has been into your building and carried out works, however you have not received the invoice, hence we must accrue for the cost as it belongs to this period.
Interest Receivable: An example of interest receivable is: term deposits which are typically not received until maturity.
At the end of the year all of the above should have a balance – this is due to journals and accruals being carried out as part of the end of year procedures.
Cash at Bank: this is the current balance of your bank account
Investments: if the BC has any investments these will be itemised for each investment held
Contributions Paid in Advance: levies that have been paid in advance of due date
Second/Sundry Debtors: any invoices that have been raised and are still outstanding for debtors other than your lot holders
Levies in Arrears: levies which are overdue, and have not been paid yet
Other Arrears: insurance recoveries or any other levy that has been raised along with any interest or debt collection fees that are overdue, and have not been paid yet
Interest Receivable: should only have a balance at the end of the year, as we are accounting for the interest that is due for the period, but has not actually been received yet
Prepayments /Levies in Advance: levies which are prepaid for a future period, but will only appear within the BC if your BC is registered for GST, as this is a control account
Prepaid Expenses: these would normally be zero during the year, if there is a balance during the year you should bring this to your accountant’s attention.
Electricity Receivables/Arrears/Finalised: these accounts reflect the utilities recovery company’s balances.
Recovery Costs: costs that have been applied to each lot for debt collection, but still have to be collected.
GST Clearing A/C: the net amount of GST payable to or receivable from the ATO
Creditors: a consolidated list of all the outstanding invoices that the BC has yet to pay. Sometimes this is a negative figure, and this could be because a refund is due from the ATO or a creditor having a credit note on their account
Accrued Expenses: work performed that has yet to be invoiced. Should normally be zero during the year. If there is a balance during the year then you should bring this to your accountant’s attention.
Next Year Discount: the balance of lot owners levy accounts paid in advance. The discount is removed to reflect it within the period that it will be due
Levies Billed not yet Due: levies that we have billed, but have not yet become due. The system removes these from the current income statement, but they will be put back into the income when they become due
Prepayments/Levies in Advance: the amount that appears in the asset listing minus the GST. This account only appears if your BC is registered for GST
Levies in Advance: levies that we have billed, but received in advance of due date
Other Payments in Advance: the insurance or any other charge that has been billed and paid in advance of due date.
Unallocated Deposits: payments which have been received, but lacking essential information, so we are unsure about where these payments belong. It is a holding account, and it will be recorded under the correct account code, as soon as we receive the information on what the payment is for. We usually work through the lot owners and second debtors to try to allocate it, but sometimes we have to speak with Community Managers or even do a bank search which can take up to 5-6 weeks.
Suspense Account: usually a miscoded expense. If there is an amount here you should bring this to your accountant’s attention.