✓ Checked for updates, April 2022. Accountingverse.com

Step 1: Gather the needed information

Like in any other financial statement, we need to gather information to be used in preparing a balance sheet. Any source that shows updated account balances can be used. The most appropriate source for this, however, would be the adjusted trial balance.

Gray Electronic Repair Services
Adjusted Trial Balance
December 31, 2021

Account Title	Debit	Credit
Cash	$ 7,480.00
Accounts Receivable	3,700.00
Service Supplies	600.00
Furniture and Fixtures	3,000.00
Service Equipment	16,000.00
Accumulated Depreciation		$ 720.00
Accounts Payable		9,000.00
Utilities Payable		1,800.00
Loans Payable		12,000.00
Mr. Gray, Capital		13,200.00
Mr. Gray, Drawing	7,000.00
Service Revenue		9,850.00
Rent Expense	1,500.00
Salaries Expense	3,500.00
Taxes and Licenses	370.00
Utilities Expense	1,800.00
Service Supplies Expense	900.00
Depreciation Expense	720.00
Totals	$ 46,570.00	$ 46,570.00

Step 2: Prepare the heading

The first line contains the name of the company. The second line shows the title of the report. We can use either "Balance Sheet" or "Statement of Financial Position". The third line indicates the date of the report.

The income statement, statement of changes in equity, and statement of cash flows use For the Year Ended, For the Month Ended, For the Quarter Ended, etc. However, we cannot use any of those phrases in a balance sheet since we are not reporting information for a period of time, but rather, information as of a certain date.

Therefore, we shall use "As of...". Though, some balance sheets omit the phrase.

Gray Electronic Repair Services
Balance Sheet
As of December 31, 2021

Step 3: Report all company assets

From the trial balance, we take all assets and report them in the balance sheet. Current assets are reported separately from non-current assets. After which, we will compute for the total current assets, the total non-current assets, and the total assets. A single line is drawn every time a mathematical operation is made. The amount of total assets is double-ruled.

Gray Electronic Repair Services
Balance Sheet
As of December 31, 2021

ASSETS
Current Assets:
Cash	$ 7,480
Accounts Receivable	3,700
Service Supplies	600
Total Current Assets		$ 11,780
Non-Current Assets:
Furniture and Fixtures	$ 3,000
Service Equipment	16,000
Less: Accumulated Depreciation	720
Total Non-Current Assets		18,280
TOTAL ASSETS		$ 30,060

Note: The above step requires you to be familiar with asset accounts. The next steps will require knowledge of liability and capital accounts. If you need a review of different accounts, you may visit this lesson: Elements of Accounting.

Step 4: Report all liabilities

After the "assets" portion, we will now present "liabilities and capital". We will start by presenting current liabilities, followed by non-current liabilities. After that, we will take the totals of each as well as the amount of total liabilities – just like what we did for assets.

Gray Electronic Repair Services
Balance Sheet
As of December 31, 2021

ASSETS
Current Assets:
Cash	$ 7,480
Accounts Receivable	3,700
Service Supplies	600
Total Current Assets		$ 11,780
Non-Current Assets:
Furniture and Fixtures	$ 3,000
Service Equipment	16,000
Less: Accumulated Depreciation	720
Total Non-Current Assets		18,280
TOTAL ASSETS		$ 30,060

LIABILITIES AND CAPITAL
Current Liabilities:
Accounts Payable	$ 9,000
Utilities Payable	1,800
Total Current Liabilities		$ 10,800
Non-Current Liabilities:
Loans Payable	$ 12,000
Total Non-Current Liabilities		12,000
Total Liabilities		$ 20,800

Step 5: Report the ending balance of capital

The trial balance above does not show the ending balance of capital. The ending balance of capital can be taken from the Statement of Changes in Equity. If you have been following our tutorials, we prepared it before preparing this balance sheet. In any case, any source may be used as long as it gives you the ending balance of capital.

After including capital, we will take the total amount of "liabilities and capital". This amount is double-ruled.

Gray Electronic Repair Services
Balance Sheet
As of December 31, 2021

ASSETS
Current Assets:
Cash	$ 7,480
Accounts Receivable	3,700
Service Supplies	600
Total Current Assets		$ 11,780
Non-Current Assets:
Furniture and Fixtures	$ 3,000
Service Equipment	16,000
Less: Accumulated Depreciation	720
Total Non-Current Assets		18,280
TOTAL ASSETS		$ 30,060

LIABILITIES AND CAPITAL
Current Liabilities:
Accounts Payable	$ 9,000
Utilities Payable	1,800
Total Current Liabilities		$ 10,800
Non-Current Liabilities:
Loans Payable	$ 12,000
Total Non-Current Liabilities		12,000
Total Liabilities		$ 22,800
Gray Capital, ending		7,260
TOTAL LIABILITIES AND CAPITAL		$ 30,060

Total assets should be equal to total liabilities and capital. If they are not, then something must have gone wrong during the process.

There you have it. The balance sheet we have just prepared is for a sole proprietorship business. In a partnership, several capital accounts will have to be presented – one for each partner. In a corporation, the capital portion is known as stockholders' equity and is made up of capital stock, reserves, and retained earnings.

Key Takeaways

A balance sheet presents a company's financial condition. Financial condition pertains to how much assets the company owns, how much liabilities it owes to others, and its equity (assets minus liabilities) at a certain date.

Like and share!

Web link

How to prepare a balance sheet

APA format

How to prepare a balance sheet (2022). Accountingverse.
https://www.accountingverse.com/accounting-basics/how-to-make-a-balance-sheet.html

Next Chapter

≡

Closing Entries

Previous Lesson

←

How to Prepare a Statement of Changes in Equity

Chapter Outline