How to Fill Out a Balance Sheet Using US Sources

Accounts use ledger information to create balance sheets.

United States sources of accounting information follow the Generally Accepted Accounting Principles, or GAAP. GAAP is the legal standard set by the Federal Accounting Standards Board and overseen by the U.S. Securities and Exchange Commission. If you're an accountant unfamiliar with GAAP, you should familiarize yourself with the regulations before working with U.S. accounting sources. For example, U.S. accounting information is accrual-based, unless it comes from a statement of cash flows or from a cash-based account. Accrual accounting data is recorded in the time period in which economic events occur, instead of when payments are made.

Things You'll Need

• Previously prepared accounting ledger or worksheet

Instructions

1. Familiarize yourself with GAAP standards. Basic GAAP standards include the cost principle, the monetary unit assumption and the economic entity assumption. GAAP also mandates accounting methods such as accrual accounting, methods for preparing official financial statements and the revenue recognition principle.

2. Understand the elements of a balance sheet. Balance sheets include assets, liabilities and stockholder equity. Assets are business resources. Liabilities are debts and obligations. Stockholder equity is assets minus liabilities, which includes working capital, retained earnings, revenue and dividends.

3. Create a chart using the basic accounting equation. The basic accounting equation is, assets equal liabilities plus stockholder equity. Place assets on the left side of the balance sheet chart and liabilities plus stockholder equity on the right side of the chart.

4. Transfer economic activity and transactional information from the ledger or worksheet to the balance sheet. Economic activity includes selling, buying, accumulating debt and accumulating revenue. Selling produces revenue, which takes from assets and adds to stockholder equity. Buying equipment adds to assets and reduces liabilities.

5. Balance the balance sheet. Activity on one side of the balance sheet produces matching activity on the other side of the balance sheet. The assets side should equal the liabilities plus stockholder equity side of the balance sheet equation. If the sides don't match, you should scan the sheet for errors.

6. Adjust balance sheet to meet GAAP accrual accounting mandates. To keep the account accrual, deduct deferrals and add accrual revenues and expenses. Deferrals include prepaid expenses and unearned revenue. Accruals include revenues received, but not recorded and expenses incurred but not yet paid.

References

• Principles of Accounting: Welcome to the World of Accounting
• "Financial Accounting, Sixth Edition"; Jerry J. Weygandt, et al.; 2008
• Accounting Coach: Balance Sheet

Resources

• FASB: Authoritative Source of Guidance