Balance Sheet

Assets = Liabilities + Owner's Equity

What exactly is the balance sheet? In short, a Balance Sheet is a report that gives you a summary of the financial situation of a business on any given date. But what does that mean exactly?

balance sheet

It will show you the total value of your company's assets, liabilities, and equity.

Interestingly enough, it got it's name because the total of the assets is always exactly equal (in balance) to the combined total of the liabilities and equity.

The formula looks like this: Assets = Liabilities + Owner's Equity. This is also otherwise known as the Accounting Equation.


Balance Sheet Accounts

There are many different bookkeeping accounts that appear on the monthly and annual report.

The different bookkeeping accounts you will find can be thought of as all of the things (including money) that you own as well as all of the debts that you owe.

This would include things like bank accounts, property (buildings), equipment, furniture and amounts that people owe you (Accounts Receivable).

This also includes all of your liabilities such as bank loans, credit cards, and amounts you owe to other people (Accounts Payable).

Additional types of bookkeeping accounts that you will find are the equity accounts. These indicate what your business is worth and include all of the money (investments) that the owners have put into the company as well as all of the money, draws or distributions that the owners have taken back out.

The equity of your company is the total of all of your assets (what you own) minus the total of all of your liabilities (what you owe). This is also known as the net worth of your company.

When determining what you equity is, the accounting formula changes. Now the formula would look like this: Equity = Assets - Liabilities.

Sample B/S Report

Your b/s report may be long or short depending up the type of company you have, how many assets, furniture, equipment, and loans you have. However a report will always have the same overall look and feel. A sample report might look something like this...

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What Other Visitors Have Said

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Theft on Balance Sheet 
Where does theft fall into the equation on the balance sheet? A business, starting with $102K in assets and $102K in liabilities, takes on a $50K loan, …

School Balance Sheet Assignment 
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Is Accounting Equation an Ideal or Reality? 
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Where on the balance sheet should a suspended loss be posted and shown?

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Where is a prepaid expense deposit to open a utility account listed on the balance sheet?

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I am confused as to how to make a balance sheet. Will you please provide more information on what I should do?

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Is there anything in particular you can advice me to check when assets don't equal liabilities? I would appreciate it, thank you.

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Why does my income tax payment not show on my end of year financial statements from my accountant?

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The Balance Sheet 
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Hi, I have a question. I want to do bookkeeping for small businesses. If a company is s-prop and I need to do their books, do I need the tax return to …

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When preparing a balance sheet and you have public shares to add to your assets, do you list them by the book value or the market value at your year end? …

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Very simply, how does one do reconciliations of balance sheet accounts?

Balance Sheet Account Withdrawals 
Please state the balance sheet effects of each of the following and provide an explanation: The owner withdraws R160 from the firm's bank account for …

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More Questions And Answers

Bookkeeping 101 Articles

Learn about the Accounts Payable

Learn about the Accounts Receivable

Learn about the Chart of Accounts

Learn about the Profit and Loss Statement

Return from Balance Sheet to Bookkeeping 101

Return to Bookkeeping Basics Home Page


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