Email: office@chronax.ro · Telefon: 0785.261.808              

Everything you need to know about a financial statement – balance sheet

What is a financial statement – balance sheet?

The financial statement or balance sheet is a summary of a company or an NGO’s financial situation at a certain point in time. It contains information on assets (capital generated from declared activities) and liabilities (own capital and debt).

The role of financial statements is to draft a clear situation (both in synthetic form and numbers) of a legal entity’s financial situation. Depending on the results and economic indicators, a firm can better manage its resources, can make predictions for the development of the business and can lead the company’s activity towards a more profitable outcome.

The annual or semestrial financial statement can be done in several forms, based on the company’s nature (differentiated according to fiscal treshholds):

  • Simplified balance sheet (for small and medium enterprises);
  • Basic balance sheet (for large enterprises).

The balance sheet structure consists in:

  • The proper balance;
  • “Profit and loss” account;
  • Balance sheet annex;
  • Management report.

Generally, the proper balance sheet includes the assets to the right, followed by a subtotal and total assets. The liabilities are similarly structured to the left, except that the total liabilities are recorded at the bottom of the document.

Who is in charge of drafting the financial situation – balance sheet?

In accordance with Accounting Law no. 82/1991, all economic entities must draw up a financial situation. In a company, the persons in charge of accountancy have this responsibility.

There are a number of principles that should be followed when making a balance sheet:

  • Compliance with the real assessment of patrimony;
  • Compliance with the fiollowing principles: prudence, consistency, continuity between opening and closing balance sheets;
  • Consistency between the data items in the balance sheet and the ones registrated in the inventory.

When should a financial situation be drawn?

Financial statements are drawn twice a year as required by law, on June 30th and December 31st. The company has the obligation to also submit the balance sheet at the Financial Administration in whose jurisdiction is registered within 150 days (for SRL, SRL-D, SA etc.). If the company is a NGO or a Foundation, the legislation (Law no. 82/1991) states that the balance sheets should be submitted within 120 days.

Although the law only states that two mandatory financial reports should be drawn early, most companies have an internal monthly balance sheet, so as to have a clear picture about their financial situation.