Understanding the contents of an association's balance sheet

From an accounting point of view, some associations are subject to the same obligations as a company, involving the keeping of full accounts and the presentation of annual financial statements. The balance sheet, an essential component of these accounts, reflects your association's assets at a given point in time, providing an assessment of its financial health.

Usually drawn up at the end of the financial year, the balance sheet of an association that receives subsidies or generates significant sales is carefully examined by the authorities, financial institutions, donors, as well as the association's directors and members.

If your association is subject to the accounting requirements of regulation no. 99-01 adopted on February 16, 1999 by the Comité de la Réglementation Comptable (French Accounting Regulations Committee) on the preparation of annual financial statements for associations and foundations, we take a closer look in this article at the contents of the balance sheet, assets and liabilities, to understand its importance.

The two essential components of the balance sheet

The balance sheet, an accounting document prepared at the end of each financial year, generally after one year's activity, is accompanied by the income statement and appendices.

It takes the form of a table with two columns: assets on the left and liabilities on the right. On the one hand, this table summarizes your association's assets, such as cash at bank and in hand, as well as membership dues. On the other, it shows debts to suppliers and other financial partners.

What items are included on the assets side of the balance sheet?

According to the association's chart of accounts, assets comprise :

  • Property, plant and equipment: land, buildings, machinery, tools, etc.
  • Intangible fixed assets: concessions, patents, etc.
  • Financial assets: loans, depreciation...

These items make up the fixed assets, representing the durable goods owned by your association and necessary for its operations.

If your association has no fixed assets, the corresponding columns will show zero values. This absence of fixed assets is not necessarily a shortcoming, as you can choose to adopt a light structure, avoiding investments in favor of rental or leasing. This approach may prove wise, depending on the type of association and its long-term prospects.

  • Inventories: goods you produce or resell to finance yourself;
  • Receivables from members, donors... ;
  • Cash on hand ;
  • Amounts in bank ;
  • Short-term investments.

These items make up current assets, which include fluctuating assets that do not remain with the association over the long term.

To appear as an asset on a balance sheet and not be considered as an expense, an item must meet several criteria:

  • The cost must exceed €500 excluding VAT
  • It must be identifiable and reliably measured
  • It must remain within the structure over the long term and provide benefits.

Let's take the example of a sports association that buys sports equipment worth €3,000 in cash. This is clearly a fixed asset, as it was purchased without recourse to a loan, documented by an invoice for a known amount (over €500 excluding VAT), and is destined to remain with the association, thus increasing the value of its assets.

What do balance sheet liabilities include?

Liabilities correspond to the means your association uses to finance its assets.

It includes :

  • Own funds or contributions: these are funds or assets made available to the association by third parties;
  • Reserves: this term refers to the accumulation of previous profits. As no part of the profit is redistributed to members when the association is profitable, the General Meeting decides to transfer these sums either to reserves or to retained earnings.
  • Retained earnings: amounts not allocated to reserves ;
  • Profit for the year: this may also be a loss, in which case it will be carried forward to the following year;
  • Investment grants ;
  • Provisions for liabilities and charges ;
  • Grants or donations ;
  • Short-term debts: these include loans, taxes, social security contributions, bank overdrafts and unpaid supplier invoices.

These resources enable the association to begin its activities. They ensure its operation and finance its development. As a manager, however, it is in your interest to keep your debts to a reasonable level, otherwise you may find yourself in financial difficulty.

Liabilities are placed alongside assets on the balance sheet. These two elements are closely linked. One identifies the source of the money, the other provides information on its destination or use. As a result, assets and liabilities total the same amount.