A balance sheet is one of the most often used financial statements that businesses rely on to measure their financial situation. It presents a snapshot of what a company's finances look like at a certain point in time, listing its assets, liabilities, and equity. For business owners, accountants, and investors, learning how to make a balance sheet is, therefore, important. To help you follow it step-by-step, here's how to make a balance sheet.
A balance sheet follows the basic accounting equation: Assets = Liabilities + Shareholders' Equity
Where Assets represent what the company owns. Liabilities represent what the company owes. Equity is the owners' claim after all liabilities have been settled (also called net worth).
The balance sheet is divided into two major sub-divisions, one to show assets on the left side and liabilities and equity on the right side. Both the sides should always balance, hence it is called a "balance" sheet.
Step 1: Classify Assets
Assets are classified into two major types, one is current and the other is non-current or long-term.
1. Current Assets: These are assets either expected to be converted into cash or used within one year. These include: i.) Cash and cash equivalents Cash, bank balances, etc. ii.) Accounts receivable Amounts owed to the company by customers. iii.) Inventory Raw materials, work-in-progress, and finished goods. iv.) Prepaid expenses Payments made in advance for goods or services.
2. Non-Current Assets: These are long-term assets that provide value over a period longer than one year. Examples include:
i.) Property, plant, and equipment (PPE): Land, buildings, machinery, and other physical assets.
ii.) Intangible assets: Patents, trademarks, copyrights, and goodwill.
iii.) Investments: Stocks, bonds, or other long-term investments.
To prepare the asset side of your balance sheet, first, make a list of all the current assets by liquidity-the easier it is to liquidate, the higher in the list it gets-and then non-curren

A balance sheet is one of the most often used financial statements that businesses rely on to measure their financial situation. It presents a snapshot of what a company's finances look like at a certain point in time, listing its assets, liabilities, and equity. For business owners, accountants, and investors, learning how to make a balance sheet is, therefore, important. To help you follow it step-by-step, here's how to make a balance sheet.
A balance sheet follows the basic accounting equation: Assets = Liabilities + Shareholders' Equity
Where Assets represent what the company owns. Liabilities represent what the company owes. Equity is the owners' claim after all liabilities have been settled (also called net worth).
The balance sheet is divided into two major sub-divisions, one to show assets on the left side and liabilities and equity on the right side. Both the sides should always balance, hence it is called a "balance" sheet.
Step 1: Classify Assets
Assets are classified into two major types, one is current and the other is non-current or long-term.
1. Current Assets: These are assets either expected to be converted into cash or used within one year. These include: i.) Cash and cash equivalents Cash, bank balances, etc. ii.) Accounts receivable Amounts owed to the company by customers. iii.) Inventory Raw materials, work-in-progress, and finished goods. iv.) Prepaid expenses Payments made in advance for goods or services.
2. Non-Current Assets: These are long-term assets that provide value over a period longer than one year. Examples include:
i.) Property, plant, and equipment (PPE): Land, buildings, machinery, and other physical assets.
ii.) Intangible assets: Patents, trademarks, copyrights, and goodwill.
iii.) Investments: Stocks, bonds, or other long-term investments.
To prepare the asset side of your balance sheet, first, make a list of all the current assets by liquidity-the easier it is to liquidate, the higher in the list it gets-and then non-curren