The creation of an opening balance sheet or closing balance sheet is indispensable within the business or financial accounting. The databases that are listed on the left – under the so-called assets side (assets) and opposite them are the so-called monetary values of the liabilities side (liabilities). These circumstances are regulated by legal definition within Section 266 (3) of the German Commercial Code (HGB).
The liabilities side (liabilities) in every balance sheet provides information about where the funds listed there come from (source of funds) and from this it can be deduced in which ratio the company’s monetary assets are financed by outside capital . In this case, the borrowed capital can be loans from credit institutions , loans from private third parties, other liabilities, etc. The assets are the counterpart to the liabilities and show the utilization of funds.
According to healthknowing, the HGB requires a clear structure with regard to the sub-items that are listed in the liabilities. Accordingly, the structure extends over the points / positions:
- Equity
- Special items
- accruals
- liabilities
- passive billing limit
According to Section 247 of the German Commercial Code (HGB), the fixed and current assets are to be shown separately in the balance sheet and broken down adequately, as is equity, debts and prepaid expenses.
The following two basic balance equations can be derived from this:
- Assets (assets) = liabilities (capital)
- Assets = equity + debt
the conversion results in:
- Equity = Assets – Debt
The structure of the liabilities side
The division of the liability side into the individual subcategories is binding and that means it must be strictly adhered to. However, a further division into further sub-headings is possible. The commercial code gives the entrepreneur a certain amount of leeway at this point so that the actual conditions of the company can be correctly mapped.
The individual items of the liabilities:
- The equity
The monetary value of the equity account results from the difference or the balance of the valuations of the assets and those of the liabilities. This is the capital generated and the capital remaining within the company. The entrepreneur has so-called residual claims on this capital value.
- accruals
The so-called provisions are there to generate uncertain liabilities and for impending losses from pending transactions in accordance with the provisions of Section 249 of the German Commercial Code (HGB).
Uncertain liabilities: these are liabilities / expenses incurred, the amount of which cannot yet be determined with certainty at the time the balance sheet was drawn up.
Provisions: They are also set up for expenses that were omitted in the financial year, such as maintenance or warranties that were provided without any legal obligations. These are regulated in Section 249, Paragraph 1, Clause 2 of the German Commercial Code (HGB).
- The liabilities
They provide information about the company’s payment obligations to third parties. In contrast to the provisions, however, the liabilities are clearly dated (terminated) in terms of their monetary amount and the date they are due.
- Deferred income
This is what is known as income, which must be reported before the balance sheet date of the respective balance sheet, provided that it represents income in a period after the balance sheet date . These are regulated in Section 250 (2) HGB.
Further items in liabilities
The liabilities side can or must be expanded accordingly in some case constellations. This is the case, if one or more values cannot be ascribed to the items described above, then these can be listed under “other items”. Should it be necessary, certain classifications and descriptions of balance sheet items can be changed in accordance with Section 265 (5) and (6) of the German Commercial Code.
The balance sheet assessment of the liabilities
The ratio of debt to equity is often set in relation to the balance sheet analysis (both items on the liability side). Different standards apply here for each industry. In principle, however, a company with an equity ratio of 40% can be classified as economically successful.
