Balance Sheet

April 13, 2006

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Also called a statement of financial position, a balance sheet is a financial "snapshot" of your business at a given date in time. It lists your assets, your liabilities, and the difference between the two, which is your owner's equity, or net worth. The accounting equation (assets = liabilities + owner's equity) is the basis for the balance sheet.

The balance sheet is prepared after all adjusting entries are made in the general journal, all journal entries have been posted to the general ledger, the general ledger accounts have been footed to arrive at the period end totals, and an adjusted trial balance is prepared from the general ledger amounts.

Financial statements normally do not show cents. All amounts should be rounded to the nearest dollar.

The following is an example of a balance sheet for a sole proprietorship:

Beta Sales Company Balance Sheet December 31, 200X
Assets			Liabilities and Capital
Current Assets			Current Liabilities
Cash	$12,300		Accounts payable	$ 8,900
Accounts receivable	22,900		Wages payable	11,525
Inventory	32,090		Total Current Liabilities		$20,425
Prepaid Insurance	2,500		Long-Term Liabilities
Total Current Assets		$69,790	Bank Loan Payable	17,500
Fixed Assets			Total Long-Term Liability		17,500
Equipment	100,200		Total Liabilities		37,925
Less: Accum. Deprec.	(78,321)		Capital
Total Fixed Assets		21,879	Tom Beta, Capital		53,744
Total Assets		$91,669	Total Liabilities/Capital		$91,669

Among the Business Tools is a sample balance sheet. It is an Excel 4.0 spreadsheet template, so you can use the template over again; you need to download it only once.

For more detailed information on balance sheets and other financial statements, see our full discussion of financial statements.