Smart Techniques of Building Schedules for Balance Sheet Line Items

financial modelling read watch Jan 24, 2024

Mastering Balance Sheet Line Items Schedules in Financial Modeling 

The importance of the balance sheet in the financial statement cannot be underestimated. And when we say schedules in financial modeling, schedule means how you perform calculations for every line item in your model.

For the income statement, you can have a revenue schedule, COS schedule, operating expenses schedule, and others. However, our focus for this post will be on the balance sheet line items, and I will share with you the smart approaches for building schedules for your balance sheet line item.


The Challenges

From several discussions, I had with friends on how to build schedules for balance sheet line items in financial modeling. I realize that the main challenge that people face is how are they going to perform this calculation.

They ask questions like how do I perform the calculation; how do I know the exact schedule for a line item, or do I need to cram a lot of calculations? 

The answer is No. All you need to keep in mind is what I will be sharing with you now, and it is just divided into three.  



The first one is the BASE schedule. BASE is simply an acronym B stands for beginning balance, A stands for Addition, S stands for Subtraction, and E stands for ending balance. 

When we talk about the beginning balance, this is just the ending balance of the previous year, addition means what will be added to that line item in a particular period, subtraction means what will be deducted for the line item, and the ending balance is just a calculation which is beginning balance plus addition minus subtraction. 

Here are the criteria you need to look out for before a line item can qualify to be calculated with a BASE schedule. 

  1. The line item will be on the non-current side of your Balance Sheet. 
  2. It will require a separate line item that you are adding and subtracting. 
  3. It will be a line item that will flow into either your cash flow from investing or financing.  

A typical example of a balance sheet line item that uses the BASE schedule is the property, plant, and equipment line in your balance sheet. 

Now let’s spell out the BASE schedule for PPE. 

Beginning Balance 

Add: New Capex 

Less: Depreciation 

Ending Balance 

In this case, the beginning balance will be the ending balance of the previous period, what you are adding will be additional PPE (Capex) in that period and you need to subtract the depreciation for the period as well, then you can calculate the ending balance. 


The BCE Schedule Solution

The second one is the BCE schedule, the BCE schedule can be used interchangeably with the BASE schedule. However, the difference between the BASE and the BCE schedule is that there is no need for you to spell out the addition line and the subtraction line, that is the addition and subtraction is a single line item, which means you are just trying to see the movement of cash, or maybe it is only the addition that happened or only subtraction that happened, then you can use the BCE schedule. 

The B is the beginning balance, the C is the change and it is calculated by doing the current year minus the previous year, the E is the ending balance which is the sum of the Beginning balance and change. 

The question now is what are the key things you need to look out for before you can make use of a BCE schedule? 

Here are the criteria you need to look out for before a line item can qualify to be calculated with a BCE schedule. 

  1. You need to consider most line items on the equity side of your balance sheet. 
  2. Any line item in which the movement of cash goes into cash flow from financing or investing activities. 

Examples are investment, share capital, share premium, etc...   

In some cases, people use the BCE for retained earnings and that could be because the company did not pay dividends. The company could be a sole proprietorship, that is 100 percent profit belongs to the owner and there is no need for dividends. 


The OWC Schedule Solution

Finally, we will look at the OWC schedule which is the third type of schedule, and OWC simply means Operating Working Capital. To perform the OWC schedule, all you will do is look at the difference between the Operating Current Assets and Operating Current Liabilities. To perform this calculation, you need to consider the points below: 

  1. Line items under the current section of the balance sheet except interest bearing and interest charging line items. 
  2. Line items that flow to your cash flow from operating activities. 

In calculating the OWC all you are doing is current assets minus current liabilities, but you need to exclude cash, bank overdraft, and other interest-bearing and charging line items.  

Afterward, you can calculate the change in OWC by doing the previous year's OWC minus the current year's OWC. 



Getting your calculation done for your balance sheet line items can be so easy if you can go through the approach discussed in this blog post, all you need to understand is the criteria of those schedules and with that, you can easily identify the schedule you need to perform the balance sheet line item calculation.

Learn more about this in the video above. 

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