A balance sheet captures the net worth of a business at any given time. It shows the balance between the company’s assets against the sum of its liabilities and shareholders’ equity — what it owns versus what it owes.
The balance sheet gives useful insights into a company’s finances. Because balance sheets typically include the same categories of information, they also allow comparison between different businesses of the same type.
A company’s balance sheet is one of three financial statements used to give a detailed picture of the health of a business. Investors and analysts will read the balance sheet alongside the income statement and cash flow statement, to evaluate the company’s overall financial position.
Download our basic balance sheet template xls to get a snapshot of your company’s financials using Excel.
Make a copy of this Google Sheets template and fill in your business details to create your own balance sheet in just a few simple steps.
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The basic balance sheet formula is:
Assets = Liabilities + Equity
As the name suggests, the equation balances out, with assets on the one side being equal to the sum of liabilities and equity on the other.
Think of it this way. Whatever a business owns — its assets — have been financed by either taking on debt (liabilities), or through investments from the owner or shareholders (equity).
Different industries, and therefore different companies, may have slight variations in reporting standards. However, balance sheets all typically use the same line items. Looking under the surface of these figures lets analysts and investors see how the business is doing financially, and compare one company to another.
On a balance sheet, assets are usually described starting from the most liquid, through to those long-term assets which may be more difficult to realise. Let’s take a look at the type of assets which feature on a balance sheet.
Current assets are also referred to as short-term assets. These are typically liquid, or likely to be realised within 12 months. Here are some examples.
Non-current, or long-term, assets, include investments and other less tangible assets which nonetheless can bring value to your business. Take a look at these examples to give you an idea of what to include.
To complete your balance sheet template you’ll need to add in details about the debts and liabilities your company owes. Here’s a run through of the information you need to capture.
Current liabilities are the items a company owes in the next year, and can include things like unpaid supplier invoices, or upcoming repayments for debts you’ve committed to like business loans. You can expect to include items like these:
Non-current liabilities means any long term liabilities. Here are a couple of examples.
When you start a business, you’ll often need to finance it with your own money. It’s important to capture this in the equity section of the balance sheet — even though it wouldn’t be considered the same as a loan from the bank.
This is whatever will remain if you subtract the liabilities of the company from the assets. Exactly how the equity is made up will vary from company to company, depending on the business type and stage. Here’s what you might include.
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