# Balance Sheet Overview

This article explains how the **Balance Sheet** works in Model Reef.

You will learn:

* How the Balance Sheet is generated from variables and timing.
* The core structure of Assets, Liabilities and Equity.
* How the Balance Sheet reconciles with the Cashflow Statement and Net Income.

The Balance Sheet shows the financial position at each point in time.

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### How the Balance Sheet is generated

The Balance Sheet is not manually built. It is generated from:

* Variable types and categories.
* Timing and delay rules.
* Asset and Liability schedules.
* Equity movements from injections and dividends.
* Net Income flowing into retained earnings.

Model Reef ensures that at every period:

```
Assets = Liabilities + Equity
```

If you specify opening balances, the engine uses them as the starting point, then applies all movements from variables.
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### Balance Sheet structure

The standard Balance Sheet layout is:

* **Assets**
  * Current Assets.
  * Non current Assets.
* **Liabilities**
  * Current Liabilities.
  * Non current Liabilities.
* **Equity**
  * Share capital.
  * Retained earnings.

You can view this by branch and by scenario, just like the P\&L.
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### Link to Cashflow Statement

The Balance Sheet and Cashflow Statement are tightly linked.

For each period:

* The change in the Cash balance equals **Net cashflow** from the Cashflow Statement.
* Changes in working capital items such as Accounts Receivable and Accounts Payable reconcile differences between accrual based P\&L and cash based flows.
* Movements in Loans and Equity reconcile to Financing cashflows.

This ensures internal consistency without needing to maintain separate reconciliation spreadsheets.
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### Link to P\&L and Net Income

The Balance Sheet connects to the P\&L via:

* **Net Income**, which flows into retained earnings.
* **Depreciation and amortisation**, which reduce asset carrying values over time.
* **Tax Expense and Tax Payable**, which track timing differences between accruals and payments.

Because the P\&L and Balance Sheet share the same underlying variables and timing rules, you can drill from any Balance Sheet line back to its drivers.
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### Branch level Balance Sheets

Branch level Balance Sheets:

* Show Assets, Liabilities and Equity for that branch and its children.
* Roll up automatically to parent branches and the consolidated view.
* Allow you to analyse financial position by division, entity, project or geography.

This is particularly important for multi entity groups, project finance structures and any model with legal entity level reporting.
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***

## Related articles

* [Retailer/Channel Margin Modelling](/use-cases/consumer-goods-fmcg-and-cpg-manufacturers/retailer-channel-margin-modelling.md)
* [Build a Live Actuals Model Using Xero](/how-tos/data-workflows-and-automation/build-a-live-actuals-model-using-xero.md)
* [Discount Rate Modifiers](/help/financial-outputs-and-valuation/discount-rate-modifiers.md)
* [Chart & Table Syntax](/syntax/chart-and-table-syntax.md)


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