# How To Create a Balance Sheet in 5 Simple Steps

Regularly analyzing the financial position of a business is vital to keep an organization on track. And the balance sheet is one of the most important financial statements for analysis, because it provides a snapshot of your company’s net worth for a specific time.

Regularly analyzing the financial position of a business is vital to keep an organization on track. And the balance sheet is one of the most important financial statements for analysis, because it provides a snapshot of your company’s net worth for a specific time.

Regularly analyzing the financial position of a business is vital to keep an organization on track. And the balance sheet is one of the most important financial statements for analysis, because it provides a snapshot of your company’s net worth for a specific time.

How do you create a balance sheet?
1. Step 1: Pick the balance sheet date. …
2. Step 2: List all of your assets. …
3. Step 3: Add up all of your assets. …
4. Step 4: Determine current liabilities. …
5. Step 5: Calculate long-term liabilities. …
6. Step 6: Add up liabilities. …
7. Step 7: Calculate owner’s equity. …
8. Step 8: Add up liabilities and owners’ equity.

## How to create a balance sheet

Here are the key steps for creating any type of balance sheet:

### 1. Gather your financial records

Make sure you have all the necessary documents available to fill in your balance sheet. Gather all transactions, invoices and financial statements related to the period of time you wish to review. You may find this information on your companys general ledger, which shows all financial transactions recorded during a specific period.

### 2. Set up your balance sheet

Determine the period of time you need the balance sheet to cover. Most balance sheets span a financial quarter, but you can choose any time period you need.

Balance sheets have three sections: assets (resources owned), liabilities (debts owed) and owners equity (shareholder contributions and company earnings). The basic accounting equation to prepare a balance sheet is:

Assets = liabilities + owners equity

The total sum of assets must equal the sum of liabilities and owners equity. If it doesnt balance, theres likely an error in one of the entries for the time period.

### 3. Account for assets

Dedicate five lines to the accounting of assets, which have a dollar value. These include amounts related to current assets (things owners may convert to cash within the year) and long-term assets (things that cannot convert to cash within a year). When listing assets, order them by liquidity. This represents how quickly assets can be converted into cash. Heres a guide on adding assets to each line:

### 4. List liabilities

A companys liabilities usually has four lines. It helps to list your liabilities by the due date, then determine if theyre current or long term. Heres how to list liabilities:

### 5. Determine equity

The last section of a balance sheet is known as the equity or owners equity category, which lists the money currently held by your company in about four lines. It references the amount belonging to business owners, including:

## What is a balance sheet?

A balance sheet is a financial statement that shows all of a companys assets, liabilities and owners equity. A balance sheet helps investors and lenders make decisions regarding investments and loans. There are several types of balance sheets available, but the most common types are:

Balance sheets help businesses calculate “debt-to-equity” ratios, which indicate the viability of a business paying its debts with equity. Another key financial ratio is the “current” ratio, which is the number of current assets divided by current liabilities. This determines whether a business has the ability to pay its debts within 12 months.

## Balance sheet template

Here is an example of a basic balance sheet template:

## Balance sheet examples

Here are some examples of balance sheets with different formats:

## FAQ

What are the 3 basic parts of a balance sheet?

The balance sheet displays the company’s total assets and how the assets are financed, either through either debt or equity. It can also be referred to as a statement of net worth or a statement of financial position. The balance sheet is based on the fundamental equation: Assets = Liabilities + Equity.