{"id":8657,"date":"2020-10-31T07:25:22","date_gmt":"2020-10-31T07:25:22","guid":{"rendered":"https:\/\/www.homeworkminutes.com\/blog\/?p=8657"},"modified":"2022-12-27T01:21:14","modified_gmt":"2022-12-27T09:21:14","slug":"how-to-make-a-balance-sheet-for-accounting-10-easy-steps","status":"publish","type":"post","link":"https:\/\/www.homeworkminutes.com\/blog\/how-to-make-a-balance-sheet-for-accounting-10-easy-steps\/","title":{"rendered":"How to Make a Balance Sheet for Accounting: 10 Easy Steps\u00a0"},"content":{"rendered":"<p><span style=\"font-weight: 400; color: #000000;\">If you&#8217;re an accounting major, there are a few significant terms that you have to know. To start with, an income statement, the statement of cash flows, and the balance sheet. If taken from the most important of the lot, it is crucial to know how to balance the sheet. If you&#8217;re pursuing your studies as a business major, you&#8217;re likely to become a part of a business organization shortly. Hence, it is good to have a fair hand at making the company&#8217;s balance sheet as per its frequency of reporting the financial statements. In this guide, we&#8217;ll walk you through the basics of the balance sheet and its making.\u00a0<\/span><\/p>\n<blockquote><p><span style=\"font-weight: 400; color: #000000;\">Also read:-\u00a0<\/span><\/p>\n<p><span style=\"color: #000000;\"><a style=\"color: #000000;\" href=\"https:\/\/www.homeworkminutes.com\/blog\/basics-of-accounting-concepts-you-must-know\/\"><span style=\"font-weight: 400;\">Basics of Accounting Concepts You Must Know<\/span><\/a><\/span><\/p><\/blockquote>\n<h2><span style=\"color: #000000;\"><strong>What is a Balance Sheet?<\/strong><\/span><\/h2>\n<p><span style=\"font-weight: 400; color: #000000;\">Before knowing how a balance sheet works, let&#8217;s know what it means for a start. A balance sheet is a financial statement that depicts the total assets, liabilities, and net worth of the businesses. To put it otherwise, it investigates the financial health of the business. With this financial statement&#8217;s help, the businesses can inform lenders, investors, or the key holders about their business. Moreover, it&#8217;s a snapshot of the company&#8217;s past and present performance and a prospect of future performance.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">The basic formula that supports the making of any balance sheet is:-<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>Assets = Liabilities + Shareholder\u2019s Equity\u00a0<\/b><\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Let&#8217;s understand the three key terms involved in making a balance sheet for accounting.<\/span><\/p>\n<h2><span style=\"color: #000000;\"><b>1. Assets<\/b><\/span><\/h2>\n<p><span style=\"font-weight: 400; color: #000000;\">Assets are the company&#8217;s valuables that are quantifiable, could be liquidated, and later turned to cash. In short, these are the goods and resources that a company owns. The term assets further break up into two categories, namely current assets and non-current assets. While the former is what a company expects to convert into cash within a year, the latter are long term investments.<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>Examples:<\/b><\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Current Assets &#8211; Inventory and Cash\/ cash equivalents<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Non-current Assets &#8211; Land, patents, and trademark<\/span><\/p>\n<h2><span style=\"color: #000000;\"><strong>2. Liabilities<\/strong><\/span><\/h2>\n<p><span style=\"font-weight: 400; color: #000000;\">To simplify liabilities, these are the company&#8217;s valuables that they owe to a debtor. For instance, these may refer to the payroll expenses, rent, and taxes or payable bonds. Liabilities to further break up into current and non-current liabilities. While the former are ones due within a year, the latter is unexpected to be paid in a year.<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>Examples:<\/b><\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Current Liabilities &#8211; Account payable\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Non-current Liabilities &#8211; Leases, bonds, and loans<\/span><\/p>\n<h2><span style=\"color: #000000;\"><strong>3. Shareholder&#8217;s Equity<\/strong><\/span><\/h2>\n<p><span style=\"font-weight: 400; color: #000000;\">Short and simple, it is the company&#8217;s net worth, left after selling all the assets and paying the liabilities. The basic equation that each company has to fulfill is:-<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>Shareholders\u2019 Equity = Assets &#8211; Liabilities<\/b><\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Now that you&#8217;re well-acquainted with the terms that make up the basics of a balance sheet, here&#8217;s how to prepare one.\u00a0<\/span><\/p>\n<h2><span style=\"color: #000000;\"><strong>How to Prepare a Balance Sheet<\/strong><\/span><\/h2>\n<p><span style=\"font-weight: 400; color: #000000;\">Whether you use an accounting system or program, it is advisable to know the basics of a balance sheet for error-tracking. Here are the series of steps that you must follow for a properly balanced sheet.<\/span><\/p>\n<h3><span style=\"color: #000000;\"><strong>1# Setting Up the Balance Sheet<\/strong><\/span><\/h3>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 1: Use a basic accounting equation to make a balance sheet<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>Assets = Liabilities + Shareholder\u2019s Equity\u00a0<\/b><\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 2: Choose the correct date for making a balance sheet\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">The businesses are most likely to make their balance sheet quarterly (the last day of March, June, September, or December) or at the end of the fiscal year (December 31).<\/span><\/p>\n<h3><span style=\"color: #000000;\"><b>2# Prepare the Assets Section\u00a0<\/b><\/span><\/h3>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 3: List all the current assets and calculate the total current assets<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">This section will include all that can be liquidated into cash within one year of the balance sheet date.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 4: List all the non-current assets or, as you may call it, the long term assets<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">The general ledger in the section will indicate the current value of the long-term assets.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">You can also keep a column for intangible assets that mainly include patents, copyright, trademarks, etc.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 5: Add up the current and non-current assets under &#8220;Total Assets&#8221;<\/span><\/p>\n<h3><span style=\"color: #000000;\"><b>3# Prepare the Liabilities Section\u00a0<\/b><\/span><\/h3>\n<p><span style=\"font-weight: 400; color: #000000;\">The section for the liabilities proceeds just like the assets section.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 6: Determine the current liabilities\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">These are the liabilities due to one of the balance sheet dates. The subtotal of the current liabilities is &#8220;Total Current Liabilities.&#8221;\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 7: Calculate the long term liabilities, also known as fixed liabilities\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Preceding this, add the current liabilities subtotal to the long-term liabilities subtotal.\u00a0<\/span><\/p>\n<h3><span style=\"color: #000000;\"><b>4# Calculate Owner&#8217;s Equity and Totals\u00a0<\/b><\/span><\/h3>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 8: Calculate the retained earnings\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 9: Calculate the owner&#8217;s equity\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">Step 10: Add up the &#8216;Total Liabilities&#8217; and &#8216;Total owner&#8217;s equity&#8217; figures<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">By following up with these ten steps, you&#8217;ll get the resultant balance sheet, which is a critical financial statement for checking the company&#8217;s financial health.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; color: #000000;\">If you want to get help with more such accounting or financing account help, seek instant online assignment help. We provide 24*7 tutorials from professionals. Chat with us!<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you&#8217;re an accounting major, there are a few significant terms that you have to know. To start with, an income statement, the statement of&#8230;<\/p>\n","protected":false},"author":1,"featured_media":8658,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_wp_rev_ctl_limit":""},"categories":[41],"tags":[543,542],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How to Make a Balance Sheet for Accounting: 10 Easy Steps\u00a0<\/title>\n<meta name=\"description\" content=\"In this guide, you&#039;ll learn how to make a balance sheet for accounting in the ten easy ways. 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