How to Make a Balance Sheet
Are you into business, and do you ever wonder how to make a balance sheet? Of course, you can always generate a simple balance sheet for your company effortlessly. But, for this, you must understand how to generate a balance sheet to identify possible problems and correct them before they cause long-term damage.
Take a look at the making of a balance sheet.
1. Determine the Reporting Date and Period
A balance sheet depicts a company’s total assets, liabilities, and shareholder’s equity on a specific date, known as the reporting date. Typically, the reporting date is the last day of the accounting period.
How Frequently Is a Balance Sheet Produced?
Companies, particularly publicly listed companies, generate quarterly balance sheet reports. Here, the reporting date is normally the last day of the quarter. These dates are for businesses that operate on a calendar year:
- Q1: March 31st
- Q2: June 30th
- Q3: September 30th
- Fourth quarter: December 31st
Companies that report annually will frequently pick December 31st as their reporting date. However, they can use any date. It is common to take several weeks to produce after the reporting period has concluded.
2. Determine Your Assets
After determining your reporting date and period, you must total your assets as of that date.
A balance sheet list assets in two ways:
- individual line items
- total assets
Splitting assets into different line items will help analysts comprehend your assets and their place of origin. The ultimate analysis will involve summing them together. You can add assets frequently into the following line items:
Current assets include:
- Money and its analogues
- Short-term liquid securities
- Inventory Other existing assets Accounts receivable
Non-current assets include:
- Long-term liquid securities
- Intangible assets include goodwill.
- Other long-term assets
- Both current and non-current assets should be subtotaled and then summed.
3. Determine Your Liabilities
Similarly, you must identify your obligations. Again, these should be broken down into line items and totals, as seen below:
Current liabilities include:
- Accounts receivable
- Expenses incurred
- Revenue deferred
- Other current obligations include the current element of long-term debt.
Non-current liabilities include
- Revenue deferred (non-current)
- Long-term lease commitments
- Long-term obligation
- Other long-term liabilities
As with assets, these should be both subtotaled and then totalled together.
4. Determine Shareholders’ Equity
Shareholders’ equity is usually accessible when a single owner privately holds a firm or organisation. However, this computation may grow more difficult if it is publicly traded, depending on the different forms of shares issued.
This area of the balance sheet frequently contains the following line items:
- The common stock
- Stock of preference
- Treasury securities
- Earnings retained
5. Calculate Total Liabilities and Compare Them to Total Shareholders’ Equity
To ensure the balance sheet is balanced, you must compare total assets to total liabilities plus equity. To do this, combine liabilities and shareholders’ equity.
The Significance of a Balance Sheet
A balance sheet is one of the most important financial documents, providing a fast overview of a company’s financial health.
If you wish to learn how to produce them and solve issues that don’t balance, you can become an essential part of your organisation.
GST billing and accounting software like myBillBook can make your balance sheet creation easier. It offers a balance sheet report in which you can enter assets and liabilities and finally download the report.