How to Prepare a Balance Sheet
A balance sheet allows you to see at a glance what your company's assets and liabilities are. The balance sheet is basically a summary of what you own and what you owe. Assets, liabilities and owner's capital are listed as of a certain date, usually at the end of a month, quarter or fiscal year. Your balance sheet gives you a way to determine the value of your business at any particular time.
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Things You'll Need
- Four- or six-column accounting paper
- Pencil
- Receipts
- Financial documents
Instructions
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1
On a sheet of four or six-column accounting paper, center the name of your company at the top of the page. Center the title "Balance Sheet" directly under that. Under "Balance Sheet" add the distinction "For the ____ ending _____." The period covered by the balance sheet might be the month of June, 2008. Therefore, this line would say "For the month ending June 30, 2008." Add the header "Assets" over the left-hand column of the paper. At the top of the right-hand column, add the header "Liabilities and Capital."
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2
List your assets under the "Assets" header. Assets include cash, accounts receivable (money owed to the company but not yet paid), inventory, prepaid expenses and fixed assets. Fixed assets include equipment, buildings and land. Directly under "Fixed Assets," indent about a half inch and write "Less Depreciation." In that column, list the depreciation in parentheses, as that amount will be deducted from the total of fixed assets.
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List your liabilities under the "Liabilities and Capital" header. Make a subheading for "Liabilities." Liabilities include accounts payable (money the company owes to creditors), payroll, utility bills and taxes. Also include long-term liabilities, such as notes payable, for liabilities due later than one year after the date of the balance sheet.
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Skip a line and make a subheading for "Capital." Capital consists of the owner's equity.
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When both sides of the balance sheet are added, they should be equal.
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Tips & Warnings
For every debit, there must be a credit.
An equation to remember is Assets = Liabilities + Capital.
If you're a small business owner and you're unsure of how to prepare a balance sheet, get help from your local Small Business Administration.
