How to Make a Business Balance Sheet

Pictoral display of a balance sheet

A business balance sheet is one of the two critical financial statements of every company. While the income statement displays how successful the company is at making a profit, the balance sheet shows the real value and stability of a company.

Things You'll Need

• Company information regarding assets and liabilities
• Basic math knowledge
• Understanding of basic double-entry accounting

Instructions

1. Put a value on all the assets of the company. Be thorough and include at least the following assets common to most businesses, regardless of their industry:
   - Real estate
   - Office equipment (copiers, fax machines, telephone systems, PCs, etc.)
   - Office furnishings, including desks, chairs, tables, lamps, wall art, curtains, rugs and any other physical objects
   - Cash, including bank accounts, investments, on hand, or anywhere else
   - Accounts receivable--income or monies earned but not yet received by the company.

2. Assemble and total your liabilities (monies due others from the business).
   - Operating expenses to be paid include:
   - Loans payable
   - Mortgages payable
   - Leases on business locations
   - Contingent liabilities (potential lawsuits, future commitments, other possible events that may cost the company money).

3. Compute the owners' (or stockholders') equity. Simply put, subtracting the company's liabilities from its assets shows the overall equity (ownership value) of the business. This number typically includes prior years' profits (usually titles retained earnings) and the recorded value of issued stock (if a corporation). The resulting number displays the value of the company.

4. Set up the balance sheet with your assets on the left side of the page and your liabilities and equity on the right side. Both sides of your balance sheet must, of courses, balance. Regardless of the size of your company, its balance sheet will look the same. Irrespective of the complexity, the balance sheet creation process will be identical.

5. When you create balance sheets for multiple companies with one ownership, combine like assets and liabilities, but make separate line items for those that are unique to each company. Commonly called a consolidated balance sheet, this statement shows the combined and total value of the related companies.

Tips & Warnings

• Value your assets and liabilities accurately. Check your math to ensure both sides of your statement are in balance. Verify assets and liabilities to ensure they are categorized correctly.

• Don't be tempted to over- or under-value assets or liabilities as you will deceive yourself and others.

Resources

• Read this Article in Spanish
• Learn More About Making a Balance Sheet