The balance sheet (bilans) is one of the most important documents in the accounts of any business. It is a statement showing the company's financial position at a specific moment, listing all the assets and equity and liabilities of the entity. For many business owners preparing a balance sheet may seem complicated, but understanding its structure and the rules for preparing it is key to running a business effectively.
The balance sheet, whose name comes from the Latin word "bilanx" meaning scales, is a static document reflecting the company's assets on a specific day. Its importance goes far beyond meeting legal obligations – it is a basic tool of financial analysis, making it possible to assess the company's economic condition and take strategic business decisions.
Financial statements – the basics
Financial statements are a comprehensive document containing key information about an entity's activity over the year. The obligation to prepare them applies to businesses keeping accounting books (full accounting) – either because of the level of their revenue, because of their legal form, or because they have chosen to keep full accounting voluntarily.
Financial statements are usually prepared by qualified accountants or specialist accounting firms. However, responsibility for performing accounting obligations lies with the head of the entity (kierownik jednostki) – for example, the management board of a company – even where bookkeeping has been entrusted to an accounting firm (Article 4(5) of the Accounting Act (ustawa o rachunkowości)). The head of the entity ensures that the statements are prepared and presents them to the approving body (organ zatwierdzający), which approves them before they are filed with the relevant institutions.
Financial statements are approved by the approving body (Article 53(1) of the Accounting Act) – in an sp. z o.o. (limited liability company) the shareholders' meeting, in a joint-stock company the general meeting, and in a partnership (other than a limited joint-stock partnership) or a civil-law partnership the partners. The head of the entity and the members of the supervisory board or other supervisory body are responsible for ensuring that the statements meet the requirements of the Act (Article 4a). This applies to all companies registered in the KRS (National Court Register) and to other entities subject to the Accounting Act
Financial statements have three main elements, each with a specific role in presenting the company's financial position. The first element is the balance sheet, which shows assets and equity and liabilities as at the last day of the current and previous financial year. The second is the profit and loss account, which shows separately revenue, costs, gains, losses and mandatory charges on the financial result for the current and previous financial year. Entities other than micro and small entities also prepare a statement of changes in equity and a cash flow statement (Article 45(3) of the Accounting Act). How to put these parts together in practice is shown in our guide to preparing financial statements step by step.
The third element of the financial statements is the notes (informacja dodatkowa), which contain detailed information on the accounting policies adopted, such as methods of measuring assets, depreciation rules and significant changes compared with the previous year, as well as additional information and explanations on the items in the balance sheet and profit and loss account (Article 48(1)). This part is particularly important for understanding the company's financial context.
The balance sheet as the foundation of financial analysis
The balance sheet is a basic element of the financial statements and needs particular attention because of its role in assessing the company's financial condition. It is a statement of all the assets and equity and liabilities of the entity, prepared in line with specific accounting principles.
In accounting practice there are two main types of balance sheet. The opening balance sheet is prepared at the start of the reporting period and is the starting point for all accounting entries in the financial year. The closing balance sheet is prepared at the end of the reporting period and summarises all the business events of the year.
A balance sheet is prepared by all businesses keeping full accounting, regardless of their size or legal form. It contains all the significant information on the company's assets and the sources from which they are financed at a specific moment
The static nature of the balance sheet means that it presents the company's financial position on a specific day, usually at the end of the financial year. The information in the balance sheet makes it easy to check whether the company's assets are adequately covered by sources of financing. Assets and equity and liabilities always balance – this follows from double-entry bookkeeping, not from an assessment of financial policy; the company's condition is shown only by the structure of assets and liabilities, for example the extent to which fixed assets are covered by equity.
The importance of the balance sheet goes beyond meeting legal requirements. It is a basic tool for managers, investors, lenders and other stakeholders, who can use the information in it to assess the company's financial stability, its ability to generate profit and its growth prospects.
Key elements of the balance sheet
A correctly prepared balance sheet must contain certain elements that are essential for its legal validity and analytical usefulness. The first basic element is the name and full address of the business to which the financial statements relate. This information makes it possible to identify the entity preparing the balance sheet unambiguously.
The next required element is a clear designation of the document as a "balance sheet", which leaves no doubt as to the nature of the statement. Equally important is stating the balance sheet date, i.e. the specific date at which the company's assets and equity and liabilities were measured.
The balance sheet date is the specific date at which all the company's assets and liabilities are measured. It is usually the last day of the financial year, but it may also be another date determined by special circumstances, such as the liquidation of a company or a change of legal form
The most important substantive element of the balance sheet is the listing of all equity and liabilities and assets in line with the balance sheet equation. This means that total assets must equal total equity and liabilities – a necessary condition for a correct balance sheet, although in itself it does not prove that the books were kept correctly.
The financial statements, of which the balance sheet is a part, are prepared in electronic form and signed with a qualified electronic signature, a trusted signature (podpis zaufany) or a personal signature (podpis osobisty) (Article 45(1f) of the Accounting Act). They are signed by the person entrusted with keeping the accounting books and by the head of the entity – where the management board has several members, by all of them or by at least one after the others have made statements (Article 52(2) and (2b)). A commercial proxy (prokurent) is not the head of the entity. Signing the statements confirms that they meet the requirements of the Act (Article 52(2a)).
The last required element is the date of signing, which the signatories state when they sign (Article 52(2)). This information is important for the timeliness of preparing the balance sheet and for its verification by inspection authorities.
Closing the accounting books
The balance sheet must be prepared within a strictly defined time limit linked to closing the accounting books. Under the Accounting Act, the books are closed in several specific circumstances, which are key to preparing the balance sheet on time.
The basic circumstance requiring the books to be closed is the last day of the financial year. For most businesses this is 31 December of the calendar year, although some entities may have a financial year with different dates.
- Preparing to close the accounting books
- Carrying out a stocktake (inwentaryzacja) of assets
- Making all adjustments and accruals and deferrals
- Preparing the closing balance sheet
- Preparing the full financial statements
- Approval of the statements by the competent bodies
The accounting books are also closed in special circumstances, such as the end of the entity's business, its sale, or the end of liquidation or bankruptcy proceedings (unless they were discontinued). In these cases the books are closed as at the day the business, liquidation or proceedings end (Article 12(2)(2) of the Accounting Act)
Other situations requiring the books to be closed are the day before a change of the company's legal form, the day of a merger involving the takeover of the entity by another entity (in the entity being taken over) and the day before a division or merger of entities if a new entity is created as a result. The books are closed no later than 3 months after these events; on the conversion of a partnership into another partnership or of a capital company into another capital company, they do not have to be closed (Article 12(2) and (3)).
Closing the books on the day before the entity is put into liquidation or declared bankrupt is particularly important. In such cases the balance sheet plays a key role in establishing the company's assets before the liquidation procedures begin.
Types of balance sheet in accounting practice
Accounting specialists distinguish various types of balance sheet, whose content and form may depend on the circumstances in which they are prepared and their purpose. Knowing the different types of balance sheet is important for understanding their role in the accounting system.
A simplified balance sheet is intended for smaller businesses that meet certain size criteria – micro entities (Annex 4 to the Accounting Act) and small entities (Annex 5), on the basis of a decision of the approving body (Article 46(5)(4) and (5), Article 49c). It presents individual items in less detail, which makes it easier for small businesses to prepare.
The reporting balance sheet is the basic form of balance sheet prepared at the end of the financial year. It is the document that goes to the registry authorities and is the basis on which external institutions assess the company's financial position.
| Type of balance sheet | Characteristics | Use | Frequency |
|---|---|---|---|
| Opening balance sheet | Prepared at the start of the year | Start of activity | Once a year |
| Closing balance sheet | Prepared at the end of the year | Summary of activity | Once a year |
| Interim balance sheet | Prepared during the year | Ongoing control | Monthly/quarterly |
| Liquidation balance sheet | Prepared on liquidation | End of business | One-off |
A published balance sheet is a version intended for publication in the media or through other information channels. It often contains additional comments and explanations that help people who are not accounting specialists understand the company's financial position.
A combined balance sheet is prepared by an entity that includes branches (establishments) keeping their own balance sheets – it is the sum of their balance sheets after eliminating, among other things, mutual receivables and payables (Article 51(1) of the Accounting Act). It is distinct from the consolidated balance sheet of a capital group, which is prepared by the parent entity
An interim balance sheet is prepared during the financial year, usually at the end of a month or quarter. It is used for ongoing monitoring of the company's financial position and does not require procedures as detailed as the annual balance sheet.
A liquidation balance sheet is a special type of balance sheet prepared when a business is liquidated. It uses a different measurement of assets, based on their liquidation value rather than their going-concern value.
Layout and structure of the balance sheet
The rules for the correct layout of the balance sheet are set out in detail in the Accounting Act, whose Annex 1 (Article 46(5)(1)) lists in detail all the elements that should make up assets and equity and liabilities. Knowing this structure is essential for preparing the balance sheet correctly.
The balance sheet is divided into items with similar economic content, measured in the same currency. The basic division is into assets and equity and liabilities, and each category has its own internal structure reflecting the economic function of its elements.
On the assets side, we find first of all fixed assets, which cover assets intended for long-term use in the business. These include, among others, tangible fixed assets, intangible assets and long-term investments.
- Fixed assets cover assets with a long useful life
- Current assets include inventories, receivables and cash
- Prepayments relate to costs of future periods
- Long-term and short-term receivables must be presented separately
Current assets (in the Act: aktywa obrotowe) are short-term assets that usually turn over within the financial year. They include inventories, short-term receivables, short-term financial assets and cash and cash equivalents.
Total assets and total equity and liabilities in the balance sheet must be identical – this is the basic principle of the balance sheet equation. This balance is a necessary condition for a correct balance sheet, but in itself it does not confirm that the accounts were kept correctly
Equity and liabilities, in turn, cover the sources of financing of the company's assets. Equity represents funds contributed by the owners and retained profits generated by the business. Long-term liabilities are debts due in more than one year, while current (short-term) liabilities are all trade payables and other liabilities due within 12 months of the balance sheet date (Article 3(1)(22) of the Accounting Act).
Deferred income includes, among other things, funds received or receivable for services that will be performed in future reporting periods (Article 41(1)); accrued expenses, on the other hand, are probable liabilities relating to the current period (Article 39(2)). Provisions for liabilities are created to cover liabilities that are probable but uncertain as to amount or timing.
Deadlines for preparing financial statements
The law sets precise deadlines for preparing and approving financial statements, and all entities keeping accounting books must meet them. Knowing these deadlines is key to avoiding legal and financial sanctions.
All entities keeping accounting books, including companies registered in the National Court Register, have 3 months from the balance sheet date to prepare their financial statements (Article 52(1) of the Accounting Act). This means that where the financial year is the calendar year, the deadline for preparing the statements is 31 March of the following year.
A manufacturing company operating for the whole calendar year must prepare its financial statements by 31 March of the following year. If the financial year ends on 31 December 2026, the statements must be ready by 31 March 2027, regardless of the size or legal form of the business.
After the financial statements are prepared, they are approved by the competent bodies of the company. These may be the shareholders of a limited liability company, the shareholders of a joint-stock company or the owner in the case of a JDG (sole proprietorship).
Annual financial statements must be approved no later than 6 months after the balance sheet date (Article 53(1)). This means that where the financial year is the calendar year, the final deadline for approval is 30 June of the following year
Approval of the financial statements is of key legal importance, because from that moment the document becomes the official summary of the company's activity for the year. Approval also involves deciding how to distribute the profit or cover the loss.
After approval, the financial statements must be filed with the KRS within 15 days of the date of approval (Article 69(1)); entities outside the KRS send them to the Head of KAS (National Revenue Administration) (Article 27(2) of the CIT Act, Article 45(5) of the PIT Act). If the statements are not received, the registry court calls for them to be filed within an additional 7-day period under threat of a fine (Article 24 of the National Court Register Act), and failure to file the statements with the KRS is an offence under Article 79(4) of the Accounting Act.
