Completing the Balance Sheet

Quick reference

• 00:04 So, what's next?
• 00:06 We've now finished off the cashflow statement.
• 00:09 We've got to go back and complete the balance sheet.
• 00:12 So to surmise, we've actually finished off the ordinary equity issuance, buybacks,
• 00:17 and dividends paid.
• 00:18 So there's nothing left,
• 00:19 all I'm highlighting now on the graphic is the balance sheet.
• 00:22 So, let’s turn our attention to the balance sheet.
• 00:26 This is what the balance sheet looks like.
• 00:27 But don't forget,
• 00:28 as we've been going along, we've been putting corresponding entries in here.
• 00:32 As we've built up the income statement and the cashfllow statement.
• 00:35 So, what’s left?
• 00:35 There’s only two items left, other current assets,
• 00:41 and other current liabilities, and guess what?
• 00:43 These are incredibly easy to model.
• 00:46 You may have heard of double-entry accounting.
• 00:48 Well, I am going to talk today about single-entry accounting.
• 00:52 Accountants might want to close their ears now.
• 00:56 It's time to finish off that blessed balance sheet now.
• 01:00 And just to prove it, let's go through our financial statements.
• 01:03 The income statement, which you've seen already, finished.
• 01:08 Let's look at the cashflow statement.
• 01:12 Finished.
• 01:14 What do we got left to do?
• 01:14 The balance sheet.
• 01:17 We haven't got row 17 completed, other current assets.
• 01:21 And we haven't got row 32 done, other current liabilities.
• 01:25 But everything else is completed.
• 01:28 So let's go and do these calculations quickly.
• 01:30 So let's go to our assumptions sheet, and
• 01:33 have a look at the assumptions for other current assets.
• 01:41 Hang on, and other current liabilities, I don't see either.
• 01:44 That's right, there's nothing to put in.
• 01:48 The other current assets and other current liabilities are silent on calculations,
• 01:52 so we're just bringing in the opening balance.
• 01:55 But, what's the balancing item for, when we bring in the opening balance?
• 01:59 Guess what, I'm gonna make the accountants amongst you very uncomfortable.
• 02:04 Everyone's brought up on this idea of double-entry,
• 02:06 that's what attracted me to financial modeling in the first place.
• 02:09 But jokes aside, what I'm talking about here with actual accounting is.
• 02:13 We haven't done a single even-numbered calculation for a control account.
• 02:17 To put it into the financial statements, to get it to balance.
• 02:20 Not one, and we're not starting now.
• 02:23 We're gonna come up with something even more bizarre, single-entry accounting.
• 02:28 The absolute balancing item, for
• 02:30 any item on the opening balance sheet, is absolutely nothing.
• 02:36 Because the opening balance sheet already balanced, we just need to bring it in.
• 02:40 So, that's all we've gotta do.
• 02:42 We could put a control account in and have opening of the current assets.
• 02:45 Increasing of the current assets, decreasing of the current assets, and
• 02:48 closing of the current assets.
• 02:50 And it would be pointless.
• 02:51 We might as well just link it straight from from the open balance sheet,
• 02:54 cuz we're lazy.
• 02:55 And look, If it really is important it might change later,
• 02:57 then do put the control accounting.
• 03:00 But I'm gonna show you another alternative practice that people do.
• 03:03 I simply, equals.
• 03:04 Go to the opening balance sheet,
• 03:06 click on other current assets here, make it absolute.
• 03:10 Press Enter, copy it across, don't need to worry.
• 03:12 We're only responsible for
• 03:14 the movement in net assets equaling the movement in total equity.
• 03:17 There ain't none, job done, that's one down.
• 03:20 Next up, other current liabilities.
• 03:22 Same thing, equals, back to the opening balance sheet.
• 03:25 Lets scroll down, there's my other current liabilities in row 32.
• 03:30 Make sure that's absolute, copy that across, done, that's it,
• 03:34 balance sheet finished.
• 03:35 So I finished the model, excellent, we can go home, not quite.
• 03:40 The opening balance sheet, you recall, we zeroed out.
• 03:42 So that we were responsible for
• 03:44 the movement in net assets equalling the movement in total equity.
• 03:48 It's time to copy it back.
• 03:50 Now, this is a time when you always have your heart in your mouth.
• 03:53 Because you copy this across, and you're praying that when you do this,
• 03:57 you go Copy and Paste, You're hoping it's going to work.
• 04:02 Sometimes it does, and sometimes you've stuffed it up.
• 04:05 What's gonna happen here?
• 04:07 It worked!
• 04:10 So when it works, you can then just delete column K, because we're done with it.
• 04:14 Even if it doesn't work, if for some reason there is an error.
• 04:17 You know its got to be a problem with,
• 04:19 one of the opening balances isn't referencing correctly.
• 04:22 So all we do is, go down each line item, and you go to the Formulas tab, and
• 04:26 you will go to Trace Dependents.
• 04:28 And would actually follow where it takes you to.
• 04:32 And it's, okay, well, that's cash, let's go down one, let's take this one.
• 04:36 Trace Dependence, and it should have one line item in your control count.
• 04:40 You go there, yep, that's fine.
• 04:43 Now, the chances are, if you have stuffed it up.
• 04:46 What you've actually done is,
• 04:49 you've probably double-counted something like accounts payable.
• 04:51 Remember, we could use that up to three times.
• 04:54 So you'll just need to go and change it, so that it only references once.
• 04:57 But that's all it will be, and
• 04:59 afterwards, you'll have a balance sheet that balances, done, finished.
• 05:04 What's next?

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