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A Balance Sheet is one of the primary business financial statements. It includes the business’s assets, liabilities, and shareholder equities. A balance sheet is one of the key instruments in evaluating a business.
What we commonly see is called a classified balance sheet which is easy to read as it is properly subcategorized.
Assets include everything the company owns. There are two types of assets on the balance sheet; current or short-term assets and long-term assets or non-current assets.
Liabilities are one of the two things that a company owes; the other is equity. Like assets, liabilities are also short-term and long-term liabilities. Liabilities include debts and obligations owed to the outside parties.
Equity is the owner’s money or stake in the business. Equity is also called the net worth of your business. You can calculate equity by subtracting liabilities from assets.
How Balance Sheet Helps you with Business Planning
When you are writing a business plan for your next adventure, a carefully calculated balance sheet can help you look into the future and improve business strategy. A forecast balance sheet will help you plan better. Your business plan is incomplete if you do not have a detailed balance sheet.
The balance sheet can be summarized in one simple formula. Balance Sheet is
Assets = Liabilities + Equity
The balance sheet is equal on both sides of the table,i.e. The assets are always equal to the sum of liabilities and equities. The balance principle makes sense. If your business owns something (as an asset), it is financed by either the shareholders’ money or the owners’ money (equity). The same goes for the liabilities and equities side as a company gains assets against liabilities and equities.
Depending on the different industries, there may be some differences in the balance sheet for different companies. However, the line items are almost always the same.
There are three parts to a balance sheet;
A balance sheet is divided into two sides. It shows the assets on the left side and liabilities and equity on the right side. As the name suggests, both sides are equal at the end of the sheet.
You can prepare a balance sheet in 6 simple steps.
1. Chose the file type for the Balance Sheet template
You can choose from a balance sheet excel template or Google Sheets template above.
2. Download the Template
Download the free balance sheet template using the download links mentioned with them.
3. Input Assets
Calculate your assets and put the number into the balance sheet template.
4. Add Liabilities
Calculate your debts and other obligations in one place, record the number and fill in the template.
5. Calculate Equity
Take out the liabilities from your assets to get your business’s equity. Write this number in the relevant field.
6. Review the Information
Recheck your data thoroughly to see if you need to make any corrections. If no correction is needed, your balance sheet is ready.
A balance sheet is a type of business statement that includes a business’s assets, liabilities, and equity. It shows the financial health of a business.
Retained earnings are the sum of all the profits and losses of a company over the time the company is operational. The retained earnings go to the liabilities and this money is kept for the sake of paying the shareholders in case of a business buyout or sale.
A balance sheet shows the company’s worth. A balance sheet gives a comprehensive picture of a business. It gives information about the business assets, liability, and equity at a glance.
A balance sheet is one of the core statements and reports about a business. A balance sheet has the details of a company’s assets, liabilities, and equity and it shows the financial health of a company.
Off-Balance Sheet (OBS) assets do not appear on the balance sheet. The OBS assets are also called incognito leverage shelter the financial statements from financing activity, asset ownership, and any related debts.
Balance Sheet accounts record the company’s transactions regarding its assets, liabilities, and equity. The balance sheet account help sorts such transactions for preparing an annual balance sheet.
Long-term liabilities are the debts that are payable after 12 months. On the opposite, the short-term liabilities are the ones payable within 12 months.
A balance sheet is organized in two parts and three heads. On the left side, the assets are mentioned. On the right side, liabilities and equity are mentioned. Both sides are equal as assets are always equal to the sum of liabilities and equity.
You can find the net income from a balance sheet using this formula.
Net Income = Revenues- cost of goods sold - expenses
Making a balance sheet is easy and straightforward. If you have an income statement for your company, just download our free balance sheet template here and put in the data from the income statement. The balance sheet template excel format will automatically make the calculations. Your balance sheet is ready.
Or, you can start with the balance sheet template, add up all your assets, liabilities, and equity and fill in the template to prepare the balance sheet.
Take out the liabilities from the company’s assets, this is your stockholder equity. Subtract the common stock line item from the stockholder equity and you will get the retained earnings.
On the assets side, you can find the retained earnings as capital that the company earned but did not pay in the dividends.