How to Read a Balance Sheet: A Guide for Association Committee Members

The treasurer hands round the annual accounts, everyone turns to the income and expenditure page, and the balance sheet gets a polite glance. Yet the balance sheet is the page that tells you whether the association can pay its bills, how much it is owed and whether its reserves are real. If you have ever wondered how to read a balance sheet without an accounting background, this guide is for you.

What the balance sheet shows

The income and expenditure statement covers a period, usually a year. The balance sheet is a snapshot on one date, typically the last day of the financial year. It answers one question: on this date, what does the association own, what does it owe, and what is left over for the members?

The basic equation is:

Assets = Liabilities + Fund

If the association closed down today, sold its assets at book value and paid off everyone it owes, the fund is roughly what would remain.

The main lines, explained

Assets: what the association owns or is owed

• Cash in hand – physical cash with the treasurer or office, including petty cash.
• Bank balances – each account listed separately.
• Member receivables – service charges and other dues billed but not yet paid.
• Advances given – money handed to staff or committee members for purchases, not yet accounted for.
• Deposits paid – for example a deposit for a utility connection or office rent.
• Fixed assets – generators, pumps, CCTV, furniture, shown at cost less depreciation if your association records it.

Liabilities: what the association owes

• Supplier payables – bills received but not yet paid.
• Advance service charge – members who have paid ahead for future months.
• Security deposits received – for example from tenants of a community hall or shops, refundable later.
• Accrued expenses – costs that belong to this year but are billed later, such as the last month's electricity.

Fund: what belongs to the members

• General fund – accumulated surplus over the years.
• Reserve or special funds – money set aside for a specific purpose, such as a lift replacement fund, if your by-laws or AGM decisions created one.

Five questions to ask when reading a balance sheet

Say a housing society's balance sheet shows ৳9,00,000 in the bank, ৳1,80,000 in member receivables and ৳60,000 in supplier payables. Here is how to read it:

1. Can we pay what we owe? Compare cash plus bank against supplier payables and other short-term liabilities. Here, ৳9,00,000 against ৳60,000 is comfortable.
2. How much of our "money" is really uncollected dues? ৳1,80,000 in receivables is an asset on paper only. Ask for the dues aging: how much is more than 90 days old?
3. Is the reserve fund backed by actual money? If the reserve fund says ৳5,00,000 but cash and bank together are ৳3,00,000, part of the reserve has been spent on running costs.
4. Are there old advances nobody has settled? An advance from two years ago is a question for the committee, not just the treasurer.
5. Does the cash figure look high? Large cash in hand is a risk. Ask why it was not banked.

Tip: Ask for the balance sheet with last year's figures in a second column. Changes are far easier to spot than absolute numbers.

Warning signs worth raising at the AGM

None of these automatically means wrongdoing. They are prompts for a polite, specific question to the treasurer, and a good treasurer will welcome them.

How it connects to the other statements

The surplus or deficit from the income and expenditure statement is added to the general fund on the balance sheet. The receipts and payments account explains how the cash and bank figures moved during the year. If you read all three together, the story of the year usually becomes clear. Rules on which statements must be presented and audited vary, so check your constitution or by-laws, or ask a qualified accountant.

For cooperatives that manage deposits, DPS and loans, see Somity Keeper; for a small somiti or savings circle, the simpler Somity Keeper Lite app keeps the books on your phone.

Balance sheets in Society Keeper

Society Keeper produces the balance sheet directly from approved vouchers, alongside the trial balance, income and expenditure, receipts and payments, member receivables and supplier payables reports. Because the dues aging report (0–30, 31–60, 61–90 and 90+ days) sits next to it, committee members can see at once how much of the receivables figure is recent and how much is old. A read-only auditor or committee role lets members review the figures without changing anything. See how it looks in a free demo.