How To Do A Balance Sheet

 

How to do a balance sheet: a balance sheet is a financial document that shows the assets, liabilities, and owners’ equity of a company at a given point in time. It’s different from the income statement in that it is a snapshot on any given day, whereas the income statement spans a time period. Most companies prepare their balance sheets quarterly and yearly.

How To Do A Balance Sheet

To put together a balance sheet, you’ll obviously need all of the financial data from your different trial balances. In reality, the information for a balance sheet starts with the individual transactions, but the purpose of this article is just to show you how to organize a balance sheet.

First of all, there are two sides to the balance sheet: the right and left side. On the left side, you’ll have your assets. On the right side, you’ll have two sections: liabilities and owners’ equity. The left and right side will always be equal, and the main balance sheet equation is:

Assets = Liabilities + Owners’ Equity

This makes sense because the Assets are on the left side, and it will always equal what is on the right side, which is the Liabilities and Owners’ Equity accounts added together.

Here’s what an example balance sheet looks like:

how to do a balance sheet

As you can see, everything listed on the left side is an asset, or something the company can use that will give them some economic benefit. Also, ¬†everything listed on the right side is either under “Liabilities” or ” Owners’ Equity”. One way to think about it is that the liabilities and owners’ equity sections are ways to explain who owns the assets on the left side.

Assets are divided into two sections: Current Assets and Long-term Assets. Current assets are assets that are expected to be used within one year. These include cash, accounts receivable, inventory, prepaid insurance, and prepaid rent. Long term assets are anything besides a current asset such as land, buildings, equipment, and most investments.

Liabilities are also divided into current liabilities and long-term liabilities. Current liabilities are liabilities that are expected to be satisfied within one year, and long-term liabilities are liabilities that will take longer than one year to satisfy.

The owners’ equity account includes the amounts that the owners of the company own. This includes common stock, retained earnings, preferred stock, and paid-in capital accounts.

The best way to learn how to do a balance sheet is to just practice filling one out a few times. Once you know where each account goes and you also understand why it goes there, it will be a lot easier to fill out a balance sheet whenever you need to.

4 Comments

  • Linh

    Reply Reply June 27, 2012

    Please send me some more examples of financial statement with explaining as soon as possible

  • Paul Xiong

    Reply Reply November 1, 2012

    Need help on how to do a balance sheet please send me a sample of the balance sheet.
    Thanks

  • EMMANUEL T.JOHNSON

    Reply Reply November 7, 2012

    THANKS FOR AWAYS BEING THE FOR US,ATLEAST I TOOK IN SOMETHING FROM THIS LESSON.AND I WILL LIKE TO LEARN MORE ON ACCOUNTING,I REALLY LOVE THE COURSE AND I WANT IT TO BE PART OF MY WHOLE BODY AND WITH YOUR, I THINK ICAN MAKE IT…..

  • algasim

    Reply Reply November 19, 2012

    i want all types of assets and liabilities because i have exam tomorrer

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