What is the accounting balance of an enterprise in Bulgaria? Balance sheet summarization.

The balance sheet is the core of the financial management of any enterprise. It presents the “assets and liabilities” in a structured form, revealing the capital base, resources and liabilities of the company. The question “what is a balance sheet?” often leads to discussions about its structure, reporting principles and how the “balance sheet summary” of information for the reporting period is carried out. By properly preparing the balance sheet, enterprises in Bulgaria can assess their “liquidity”, efficiency and financial condition, as well as prepare the necessary data for the “financial analysis” and reports.

Clients are often interested in key topics such as “book value,” “how assets and liabilities are reflected,” and “how to interpret capital and liability data.” Drawing up the balance sheet is not only part of the mandatory accounting system, but also the basis for making strategic business decisions.

The accounting and consulting company “Elan Consulting” is a reliable partner in these matters, offering expert assistance and solutions both in Sofia, Burgas, Pomorie, and other cities in Bulgaria. In this article, we will consider in detail the topic of the balance sheet and its role in the management of financial resources.

What is an enterprise's balance sheet? What is his role?

The balance sheet of an enterprise is a basic financial statement that reflects the current state of assets, liabilities and capital at a certain point in time. It is compiled according to the principles laid down in Bulgarian accounting legislation and international accounting standards, and serves as a “snapshot” of the financial situation of the enterprise. The balance is structurally divided into two main parts — Assetswhich represent the resources controlled by the entity, and liabilities, which include the sources of financing, including equity.

The role of the balance sheetis extremely important in business management, as it performs the following functions:

1. Financial Planning and Analysis: The balance allows management to assess the current state of resources and liabilities. Through it, it is analyzed Liquidity, solvencyand the entity's ability to meet its short-term and long-term liabilities.
2. Information for interested parties: This report is an essential tool for external stakeholders, including investors, creditors and regulators. They use balance sheet data to make informed decisions about financing, partnerships and investments.
3. Accountability and compliance: According to the Law on Accounting and other legal acts, enterprises in Bulgaria are obliged to draw up a balance sheet as part of their annual financial statements. This ensures transparency and accountability to tax and regulatory authorities.
4. Strategic Management Foundation: The balance sheet provides key information on the allocation of resources, which assists management in making long-term decisions related to investments, financing and business expansion.
5. Performance monitoring and evaluation: The balance sheet serves to measure the effectiveness of the management of assets and liabilities. Through it, potential problems can be identified, such as excessive liabilities or insufficient liquidity.

Drawing up the balance requires compliance with the principles of fidelity, completeness and conformity. It must present correct and clear information on all resources and liabilities in order to be able to serve as a reliable tool for managing and analyzing the financial condition of the enterprise.

What is a statement of income and expenses? What is a comprehensive income statement?

The income statement is a basic financial document that provides information on the financial results of an enterprise for a certain reporting period. This report summarizes all the income generated by the activities of the entity and all the expenses incurred related to the implementation of this activity. The main purpose of the income statement is to show whether the entity made a profit or loss during the relevant period. It includes key elements such as sales revenue, operating and financial expenses, as well as taxes on profits. The data from this report are essential to analyze the profitability and efficiency of the enterprise.

The statement of comprehensive income is an extended version of the income statement, which includes additional components of the financial result. In addition to traditional income and expenses, this statement also reflects elements that directly affect capital, but do not go through the main operating activity. This may include changes in the fair value of financial instruments, revaluations of fixed assets, exchange differences and other components. The statement of comprehensive income provides a more complete picture of the financial condition of the enterprise, giving information about all the elements that affect the economic value of equity.

Both statements are part of the mandatory financial reporting system of the enterprise and are compiled according to the applicable accounting standards. They are intended for both internal and external users of financial information, including investors, creditors and regulators. While the income statement is focused on current operating results, the comprehensive income statement also covers long-term changes in capital, making it an important tool for strategic management.

What is a balance sheet summary of the objects of accounting?

The balance sheet summary of the objects of accounting is a key method in accounting that provides a clear and systematic presentation of the financial condition of the enterprise. According to the Bulgarian accounting legislation, this method consists in matching the resources of the enterprise with their sources. At the heart of balance sheet summarization is the principle of duality, which requires that all resources (assets) have a corresponding source of financing (liabilities). This is expressed in the equality between the two sides of the balance sheet.

The balance sheet is a materialization of the balance sheet aggregation method and has two main sides — asset and liability. The assetreflects the resources of the enterprise, arranged inversely proportional to their liquidity. Liquidity represents the ability of an asset to be converted into cash. The Passive, on the other hand, presents the sources of these resources, dividing capital into own and attracted. Liabilities are arranged inversely in proportion to their accounts payable, which reflects the likelihood that the liabilities will be claimed.

According to regulatory requirements, the information in the balance sheet is presented in thousands of BGN and covers the current and previous year. Its structure includes sections, groups and articles. The smallest unit is the balance sheet item, which is part of larger balance groups numbered in Roman numerals. Balance groups, in turn, are summarized in sections denoted by capital letters.

The balance sheet summary also covers other financial documents, such as the income statement, also known as the statement of comprehensive income. In this report, expenses and income for the reporting period are compared, which complements the information from the balance sheet and allows an analysis of the financial result.

As a fundamental principle, the balance sheet summary provides the basis for the financial analysis and management of the entity, enabling transparency and accountability to all stakeholders. This method ensures that each enterprise can accurately present its financial situation and prepare reliable information for strategic decision-making.

How is balance sheet summarization performed?

The balance sheet summary is carried out through the compilation of a balance sheet, which presents the summarized information about the assets, liabilities and capital of the entity at a certain point in time. This process includes the following basic steps:

1. Identification and evaluation of objects of accounting: At the beginning, all the resources (assets) and sources of financing (liabilities) of the entity are determined. Each object of accounting is valued at its book value. Assets are presented at their current or historical prices, less accumulated depreciation or impairment, where applicable.
2. Systematization of information: The information collected on assets and liabilities is grouped into separate sections, respecting the requirements for their classification. Assets are divided into long-term and short-term according to their liquidity, while liabilities are arranged into long-term and short-term according to their maturity.
3. Compilation of balance groups and sections: Based on the collected information, balance sheet items are formed, which are grouped into larger units — balance groups. These, in turn, are summarized in balance sheet sections, with assets and liabilities arranged on separate sides of the balance sheet.
4. Ensuring equality between the asset and the liability: To ensure the accuracy and correctness of the balance sheet summary, the total amount of assets must be equal to the total amount of liabilities. This equality is based on the principle that each resource of the enterprise has a corresponding source of financing.
5. Application of corrective balance sheet items: For assets subject to depreciation or impairment, corrective articles are applied. For example, for depreciable assets such as machinery or buildings, accumulated depreciations are subtracted from their historical value to obtain their net book value.
6. Preparation of the final balance sheet: Once the information has been systematized and verified, the final balance sheet is drawn up. It is presented in two countries - asset and liability - and includes all data for the current and previous year.
7. Analysis and verification of accuracy: The balance goes through a control process to ensure that all values are correctly calculated and recorded. This verification involves comparing the turnover of the accounting accounts with the final balance sheet items.
8. Summary in additional financial documents: The information from the balance sheet is used to prepare other financial statements, such as the income statement, which complements the balance sheet data and provides a complete picture of the entity's financial position.

This balance sheet summarization process ensures that an entity's statements are accurate, complete, and compliant with regulatory requirements, which is critical to financial management and reporting.

How we compiled the sample balances:

1. Determination of assets:
   • We included all the resources of the enterprise, classifying them into fixed assets(buildings, machines, software products) and Current Assets(cash, stocks, receivables).
   • We determined the net value of depreciable assets by subtracting from their gross value the accrued depreciation.
2. Determination of liabilities:
   • We divided the liabilities into long-term liabilities(loans to be repaid after more than one year) and short-term liabilities(obligations to suppliers, personnel, tax liabilities).
3. Equity:
   • We included fixed capital, reserves and retained earnings. These components represent the funds owned by the shareholders or owners of the entity.
4. Balance equality:
   • We made sure that the total amount of assets is equal to the total amount of liabilities and equity, which ensures the correctness of the balance sheet.