Indian Newslink 15th June 2016 Digital Edition

16
JUNE 15, 2016
BUSINESSLINK
Balance Sheets essential for Not-for-profit Groups
Cherie Trewavas
In my previous article
(Indian Newslink, May 15
2016) I wrote about financial
basics for Not-for-profit
organisations and the importance
of running an efficient
business and how your primary
financial statements are the key.
I had also discussed the Profit
and Loss statement.
We will now look at Balance
Sheet, the second essential
document.
All businesses, including Notfor-Profit
organisations, must
keep a Balance Sheet along with
a Profit and Loss statement, to
meet the minimum financial reporting
requirements set out
by Inland Revenue Department
(IRD).
You can find out more about
these minimum requirements
at www.ird.govt.nz
What is a Balance Sheet?
A Balance Sheet, also known
as a Statement of Financial
Position, presents a snapshot
of the financial position of an
Organisation at a given point in
time.
Simply put, it summarises
what you own versus what you
owe at the end of the financial
year. It informs stakeholders of
your company’s financial position
(i.e. how much cash you
have and how easily you can
pay your debts).
Balance sheets are made up
of three main components, including
Assets, Liabilities and
Equity.
In basic terms, Equity is what
is left after subtracting the liabilities
from the assets.
So far, so simple, however, it
does get more complicated because
of the way your Assets
and Liabilities need to be classified
as Current or Non-Current.
Current means the things for
which the benefit will be seen
in the current financial year.
Non-current are things where
the benefit will not be realised
until sometime outside of this
12-month period.
Assets
The Assets section of a
Balance Sheet will list any cash
sitting in the bank along with
other assets, which can be
things like land, buildings, furniture
and equipment. As mentioned,
these Assets should be
separated into Current and Noncurrent
to figure out which to
which accounting period the
benefit should be attributed.
Current Assets will be cash
in the bank while Non-current
could be a term deposit that
will not mature for a couple
of years; it is still an asset, but
you will not see any benefit until
later.
Liabilities
These are things such as debts
and income tax payable.
Again, these liabilities are divided
into Current and Noncurrent.
A term loan is a good
example of a Non-current liability,
while income tax payable is
classed as Current.
Equity
The total of Liabilities is subtracted
from the total in the
Assets column, and you end up
with equity; what belongs to
your Non-Profit group.
At this point, you are probably
thinking that all these sound
very similar to the Profit and
Loss Sheet, and you would be
right, at a first glance, at least.
The difference is in the way
they treat time. Whereas the
Profit and Loss Statement looks
at the income and costs as they
are happening to show if you
are profitable, the Balance Sheet
takes a broader look at all these
component parts, including
long-term Assets and Liabilities
and shows how much your organisation
is actually worth, not
just how much money is coming
in or leaving.
More intricacies
There are still more intricacies
to come to grips with when
it comes to classifying the outgoings
and deciding which document
to record things in. For
instance, repairs and maintenance
would go on the Profit
and Loss Sheet but Capital
Expenditure (purchasing a new
asset) goes on the Balance Sheet.
To help get you thinking in
the right way, ask yourself, “Are
we spending money on maintenance
or assets?”
Obviously, keeping track of
everything at this point is getting
trickier.
That is where good bookkeeping
habits come in, along with
good relationship with your
Accountant and the Bank.
If you have any questions
about how BNZ can support
your Non-Profit organisation
call us on 0800-273916.
The above article is intended
as a general discussion only,
and is based on selective information
which may not be suitable
for your purposes. BNZ
strongly recommends the recipients
take independent
legal, investment and financial
advice prior to making
any financial or investment
decisions.
Cherie Trewavas is BNZ
Partner based in Wellington.
The above is her insight into
Balance Sheets for building the
financial capabilities of Notfor-Profit
Organisations.
BNZ is the Title Sponsor of
the Indian Newslink Indian
Business Awards 2016 and
Indian Newslink Sir Anand
Satyanand Lecture 2016.
&
Present
Guest Speaker
Graeme Wheeler
Governor, Reserve Bank of New Zealand
A RARE OPPORTUNITY NOT TO BE MISSED!
The Institute of Chartered Accountants Australia New Zealand (CA ANZ) has recognised this
Lecture as a part of ‘Continuing Professional Development’ (CPD) for its members.
The Lecture is also supported by the Institute of Directors Auckland Branch
and the Auckland Law Society.
Keeping our financial system safe
in a changing world
Monday, July 25, 2016
Pullman Hotel, Auckland
Master of Ceremonies
Professor Sekhar
Bandyopadhyay
PhD, FRSNZ
Head, School of History,
Philosophy, Political Science and
International Relations
Director, New Zealand India
Research Institute
Victoria University of Wellington
Reflections
Rod Oram
Business Journalist
To Register Call (09) 5336377 or 021 836 528
Email: editor@indiannewslink.co.nz
Tickets at $150 plus GST (including cocktails from 630 pm to 730 pm and dinner)
are now available. For details, please email editor@indiannewslink.co.nz
Sponsors
Dress Code: Formal, Black Tie for Men, Cocktail Dress for Women