How to Prepare a Balance Sheet
One of the important elements of financial statement analysis is the balance sheet. This shows your assets—which is what you own, your liabilities—which is what you owe, and your owner’s equity—which is yours and your partners' investment in the business.
First, you'll need to determine the financial statements that you or your financial professional will generate for your business. These financial statements will help you determine your firm's financial position at a point in time and over a period of time, as well as your cash position. Many small businesses fail because an owner loses a grip on the firm's financial position. If you understand financial statements, that won't happen to you.
- Line 1 is the firm’s cash account. Small business firms must keep some cash on hand for day-to-day transactions. Business firms also need to keep cash on hand for emergencies and to take advantage of any bargains they might find in the marketplace.
- Line 2, accounts receivable, represents what your credit customers owe you if your firm extends credit. Since the balance sheet is like a snapshot of a firm’s financial position at one point in time, the figure for accounts receivable and all the other accounts are accurate for the day on which this financial statement is developed.
- Funded partly by firms and companies, the charity places top graduates in schools serving low-income communities for at least two years, knowing full well that many of them will leave the profession at the end of this period.
- The last asset on the sample balance sheet is fixed assets. This asset is stated on Line 4 and includes any equipment and vehicles you own and any land and buildings you own. These assets normally refer to the large and highly valued assets that are owned by your business firm and those that can be depreciated over time.
- The value of the asset accounts is totaled and stated on Line 5. Total assets are the value of everything your firm owns.
Liabilities and Equity
- Line 7 shows any long-term bank loans or loans from other sources that you’ve taken out with a maturity of more than a year. You may have had to use long-term loans to keep your firm solvent.
- Over the summer, the bubble in the Chinese stock markets burst, wiping out trillions of dollars in valuation. Despite extensive efforts to contain the plunge, the Shanghai Composite Index had declined 43 percent on Aug. 26 since its peak on June 12.
"It became an issue about so many things, such as the environment, energy, workplace disasters and the role of big government. It became a lightning rodfor peoples' anxieties," she explained.
- In New York it is illegal for anyone to rent out a room in an apartment in a multifamily building for less than 30 days if a tenant is not present. Yet almost weekly, someone writes to Ask Real Estate seeking advice on how to skirt the rules. What if I swap apartments? What if nothing is in writing?
STEP 7: DEVELOP a special interest
Balance Sheet Example
|Liabilities and Equity||Value|
|6.Accts Payable||$ 180,000|
|7.LT Bank Loans||240,000|
|9.Total Liab & Equity||820,000|