How to Write a Balance Sheet
There are really no guidelines or exact instructions on how to write a balance sheet. This is because different individuals can design and create any document that will match to their every needs and activities.
The one writing a balance sheet must, however, focus on one major goal and that is to facilitate measure spending.
Balance sheets are those which present the current financial conditions of a certain business. This usually includes those financial accounts during a close of accounting period. In general, the major contents of balance sheets are the stockholders’ or the owner’s equity, assets and liabilities.
Assets and Liabilities
The assets together with liabilities can be split into short or long term obligations which may include cash accounts. Examples of cash accounts are government securities, checking, and money market. You should also keep in mind that your assets must be equal to your liabilities plus the equity of the owner or stockholder. More specifically, assets are those things that your business owns which have monetary values. On the other hand, liabilities are those claims of your creditors against any of your business assets.
What Should Be Included In a Balance Sheet?
Moreover, it is the balance sheet together with the income statements which is considered the basic elements when presenting financial reports to your potential lenders like the banks, vendors who want to try the amount of credit to award the firm, and the investors. Other facts that you should include in your balance sheet are the current assets which involve cash, account and note receivables; fixed assets which must be comprised of land, buildings, office equipment, machinery, vehicles, and total fixed assets; total assets; liabilities and the owner’s equity which will include accounts and notes payable, accrued payroll as well as withholding, total current liabilities, long term liabilities, payable mortgage note, owner’s equity, common stock, retained earnings; and lastly, the total liabilities as well as the owner’s equity which will include all of the debts as well as monies that the business owed to other outside creditors, banks, or vendors.
Benefits of Writing a Balance Sheet
The benefit of writing a balance sheet is that it will aid you in handling your business’ financial strength as well as capabilities in just a number of hours. You can also identify if your business is already ripe for expansion or if it can already handle any financial ebbs and the flows of expenses and revenues. Aside from that, it will also assist you in determining whether your business can already take steps in bolstering the cash reserves. More importantly, balance sheets will make you identify and analyze much better the business trends. This most especially applies to areas involving payables and receivables.
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