How to Prepare a Balance Sheet in Proper Form & Content

A balance sheet, also known as a statement of financial position, is a financial statement that lists a company's assets, liabilities and equities. It is prepared in two different ways; the most common is the proper form and content method, also called the account form. The other way is called the report form. Both ways a balance sheet is prepared follow the standard accounting equation: Assets = Liabilities + Owner's Equity.

Instructions

    • 1

      Label the statement. Every financial statement begins with the name of the statement, the company's name and the statement date. To complete a balance sheet, obtain the company's up-to-date general ledger; which is a book that contains the balances of all accounts.

    • 2

      List the assets. A balance sheet in proper form lists all assets on the left side of the statement and all liabilities and equities on the right side. Beginning on the left side, label the column "Assets." Assets are considered any items that a company has that have monetary value.

    • 3

      Categorize the assets. Divide the assets into categories. The first category is called current assets. Write this word and then list all accounts and balances that fall into this category. To qualify as a current asset, the asset must be able to be turned to cash within one year or less. Current assets include cash, accounts receivable and supplies. Long-term assets is the second category. These types of assets are things of value that normally cannot be turned into cash in one year or less. Items considered long-term assets include land, buildings and machines. The final category is other assets. Any asset that does not fall into the other categories is placed in this category.

    • 4

      List the liabilities. On the right side of the statement, list all liabilities. Liabilities are amounts the company owes to various vendors and are separated into two categories. Current liabilities are bills the company expects to pay within one year or less and long-term liabilities are amounts the company will pay off later than one year from now.

    • 5

      List the equities. Write down the amounts of all equity accounts. Equity accounts represent the amount of money each owner has invested within the business.

    • 6

      Balance the totals. Total out each category within the asset section and then place the total of all assets at the bottom of the asset column. Total out each liability section and add up the total of all liabilities. Place this amount under the liabilities. Total out the equity amounts and write it in under the equity section. Add up the total liabilities and total equities and place this amount on the bottom of the right-hand side of the statement. This amount should equal the total asset amount.

    • 7

      Include any necessary notes. To keep the balance sheet in proper form and content, add any notes to the bottom of the statement that explain any items on the balance sheet that are unusual.

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References

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