How to Prepare a Restaurant Balance Sheet [Template Included]

If you want to create a balance sheet for your restaurant, you’ve landed on the right page.

In this article, I include what a restaurant balance sheet is, how to prepare it, a template, and examples too.

So let’s dive into the article.

What is a Restaurant Balance Sheet

A restaurant balance sheet is almost the same as a traditional balance sheet, which contains a list of items from the restaurant’s perspective.

It shows the financial strength of the restaurant. By analysing this report, owners can make better decisions to grow and manage the business.

The balance sheet contains assets and liabilities of the company, showing analysts what the restaurant owns and owes. It also highlights how effectively the restaurant uses its assets to grow the business.

However, you should also consider the profit and loss statement for understanding the balance sheet and the actual financial position of the restaurant (we’ll discuss this later).

The balance sheet is one of the three main financial statements used to assess the financial condition of the company:

1. Profit and loss statement
2. Cash flow statement
3. Balance sheet

Restaurant Balance Sheet Format

The balance sheet presents the total assets and liabilities of the business. All companies follow the same type of format to prepare the balance sheet, including restaurant balance sheets.

The balance sheet is generally divided into three sections:

• Assets
• Liabilities
• Shareholders’ equity

Assets:

Assets are things that the restaurant owns, including land, cooking equipment, furniture, inventory, and cash on hand. Assets are also categorised into two parts:

Short-term assets: Can be converted into cash within a year, such as restaurant inventory and raw materials.

Long-term assets: Not likely to be converted into cash within one year, examples include kitchen equipment and land.

Liabilities:

Liabilities are things that the company owes, including outstanding bills, property lease, and loans. Liabilities are also categorised into two parts like assets:

Short-term liabilities: These are obligations typically settled within a year, such as utilities, short-term loans, wages, and income tax.

Long-term liabilities: These are obligations not due within a year while many restaurants may not have significant long-term liabilities, some might have leases or loans.

Shareholders’ Equity:

Shareholders’ equity is the equity of the stockholders in the business. It is what is left for the owner after subtracting liabilities from assets.

Most restaurants do not trade on the Stock Exchange, but if they do, the equity of common stock is added to this section.

There is a golden rule of the balance sheet: Assets are equal to liabilities and shareholders’ equity.

Assets = Liabilities + Shareholders’ Equity

If the above formula is not correct, there may be an error in the balance sheet. These sections remain the same for all types of industry balance sheets.

Prepare Restaurant Balance Sheet with a Template

To prepare the balance sheet for a restaurant, follow these steps:

Step 1: Download the Template

One of the first steps to preparing a restaurant balance sheet is to create an Excel template. I suggest you download my restaurant Excel template for your ease.

Step 2: Gather All Assets

Now make a list of things that the restaurant owns, including both short-term and long-term assets, such as kitchen equipment, restaurant land, inventory, and raw materials, etc.

Step 3: Gather All Liabilities

Next, gather all the things that the restaurant owes, such as utilities, short-term loans, wages, income tax, etc.

Step 4: Combine Data

After listing out assets and liabilities, input all the data into the Excel template. If you have some different components, add them too. Then add figures for equity and verify that the assets are equal to the liabilities and equity.

Restaurant Balance Sheet Example

Here is a hypothetical example of the CULINARY COVE CAFE. The balance sheet of the CULINARY COVE CAFE is divided into three parts, and both assets and liabilities are subdivided into short-term and long-term categories.

Furthermore, we can also compare the balance sheet over more than one time period to see how the restaurant performs between these periods.

Here the total assets of CULINARY COVE equal the total of its liabilities and equity.

Assets = Liabilities + Equity = $445,000

Profit and Loss Statement

As discussed above, three types of financial statements are used to analyse a business. One of them is the profit and loss statement, also known as the income statement.

The income statement includes revenue generated by the restaurant and all expenses. To calculate the income of your restaurant, use this formula:

Net sales – Cost of goods sold – All expenses = Net Income

Net sales refer to the revenue of the restaurant generated over a period, which can be monthly, half-yearly, or yearly. The cost of goods sold is the cost used to manufacture products like burgers, pizzas, etc.

All expenses include all types of expenses, such as operating expenses to operate your restaurant, administrative expenses, etc.

Without a profit and loss statement, we can’t analyse the balance sheet properly. The income statement provides accuracy for checking the balance sheet data.

Also, do not confuse it with the cash flow statement, which lists the sources of cash coming in and going out, such as cash coming from customers and payments to suppliers for raw materials.

Remember: Cash is different from revenue; when customers buy items on credit, it is recognised as revenue, but you will not receive actual cash. That’s why the cash flow statement is important; it shows how much actual cash the company has, rather than how much revenue the restaurant earns.

Conclusion

In conclusion, the restaurant balance sheet is almost the same as a traditional balance sheet.

To prepare for it, you just need to follow a few steps. By using the balance sheet, we can access important financial ratios, which can be a game-changer in terms of balance sheet analysis.

I suggest you read my guide on the 12 top important balance sheet ratios with formulas and examples.