How to Plug the EFN on a Balance Sheet

EFN stands for external financing needed. It is the difference between assets and liabilities, and is often referred to as the "plug" figure that makes the balance sheet balance. A balance sheet is a record of a company's assets, liabilities and owner's equity. It consists of account names and the amount in that account or the amount owed to that account. If assets do not equal liabilities plus owner's equity, external financing may be needed.

Things You'll Need

• Balance sheet
• List of company's assets, liabilities and owner's equity

Instructions

1. Add the company's assets. Assets include cash, accounts receivable, inventory and fixed assets.

2. Add the company's liabilities and owner's equity. Liabilities and owner's equity include accounts payable, short-term debt, long-term debt, common stock and retained earnings.

3. Subtract the liabilities from the assets. This number represents the EFN.

4. Enter the EFN on the balance sheet. EFN is written after total liabilities and equity.

Tips & Warnings

• When external financing is needed, assets should equal liabilities plus owner's equity plus EFN. If the numbers match, the balance sheet is balanced.