create business plan balance sheet

How to write a balance sheet for a business plan

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What is a balance sheet?

Elements of a balance sheet, liabilities, how to write a balance sheet, manage your business finances with countingup.

A balance sheet is one of three major financial statements that should be in a business plan – the other two being an income statement and cash flow statement .  

Writing a balance sheet is an essential skill for any business owner. And while business accounting can seem a little daunting at first, it’s actually fairly simple. 

To help you write the perfect balance sheet for your business plan, this guide covers everything you need to know, including:

• What are assets?
• What are liabilities?
• What is equity?

A balance sheet is a financial statement that shows a business’ “book value”, or the value of a company after all of its debts are paid. 

For those inside the business, it provides valuable financial insights, allowing the owners to assess their current financial situation and plan for the future. 

For external investors, a balance sheet lets them know whether it’s a worthwhile investment.  

Putting a balance sheet together isn’t all that difficult. You just need to know the value of three things:

• Owner’s equity

Once you know these three figures, there’s just a little bit of maths – nothing too scary though.

Assets are items or resources that have financial value. They might be physical items, machinery and vehicles, or they could be intangible items, like copyrights or brand identity .

Assets are separated into two groups based on how quickly you can turn them into cash. There are current assets and fixed assets. 

Current assets are things that are fairly simple to value and sell, such as:

• Stock and inventory
• Cash in the bank
• Money owed to you (through unpaid invoices )
• Customer deposits
• Office furniture, equipment or supplies
• Phones or laptops
• Even relatively trivial items like a coffee machine or pool table

Fixed assets are valuable items that take much longer to sell, such as:

• Property or buildings
• Specialised equipment for your business operations
• Investments
• Vehicles 

On your balance sheet, the asset column is the simplest. All you need to do is list each item your business owns, along with their individual values, in a separate column. Then, add up the values to get a total at the bottom. 

Liabilities are the funds that you owe to other people, banks, or businesses. They can be:

• A business loan (the total, not the monthly payment amount)
• A mortgage or rent payment on a property
• Supplier contracts you owe
• Your accounts payable total
• Other financial obligations, such as paying wages or freelancers for support
• Taxes you’ll owe to HMRC

List these in the same way you did with your assets – on a spreadsheet with their values in a separate column. 

When you know the value of your assets and liabilities, working your equity is simple – it’s just the total value of your assets, minus the total value of your liabilities. 

Record the owner’s equity in the same column as your liabilities. When you add them all up, it should be the same value as your assets. 

After you’ve totalled up your assets, liabilities, and owner’s equity, all that’s left to do is fill in your balance sheet. 

Using a spreadsheet, record your assets on the left and your liabilities and owner’s equity on the right. 

For example, here’s what a balance sheet might look like for a painter and decorator:

If you’ve recorded everything correctly, both sides should have the same total. Whenever you make a change, the balance sheet will change, but it should still be balanced. 

For example, let’s say our painter and decorator sold their equipment. In that case, they’d lose an asset worth £200, but they’d also gain £200 in cash, so the asset total would stay the same. 

Alternatively, let’s say they lost the equipment altogether and got no money for it. In that case, they’d lose £200, leaving their asset total at £5,600. Then, they’d have to adjust the other side, so it remains balanced, like this:

If your two totals are not balanced, it’s most likely for one of these reasons:

• Incomplete or missing information
• Incorrect data entry
• A mistake in exchange rates
• And inventory miscount

Basically, if things don’t look right, try not to panic. It’s normally a simple mistake, so go over the figures again and you’ll find the culprit. 

The trickiest part of writing a balance sheet for a business plan is accurately recording financial information. 

With the Countingup business current account, you’ll have access to a digital record of all your transactions in one simple app, giving you all the financial information you’ll need for a business plan.

Start your three-month free trial today. 

Find out more here .

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How to Prepare a Balance Sheet: 5 Steps for Beginners

• 10 Sep 2019

A company’s balance sheet is one of the most important financial statements it produces—typically on a quarterly or even monthly basis (depending on the frequency of reporting).

Depicting your total assets, liabilities, and net worth, this document offers a quick look into your financial health and can help inform lenders, investors, or stakeholders about your business. Based on its results, it can also provide you key insights to make important financial decisions.

When paired with cash flow statements and income statements , balance sheets can help provide a complete picture of your organization’s finances for a specific period. By determining the financial status of your organization, essential partners have an informative blueprint of your company’s potential and profitability.

Have you found yourself in the position of needing to prepare a balance sheet? Here's what you need to know to understand how balance sheets work and what makes them a business fundamental , as well as steps you can take to create a basic balance sheet for your organization.

Access your free e-book today.

What Is a Balance Sheet?

A balance sheet is a financial statement that communicates the “book value” of an organization, as calculated by subtracting all of the company’s liabilities and shareholder equity from its total assets.

A balance sheet offers internal and external analysts a snapshot of how a company is performing in the current period, how it performed during the previous period, and how it expects to perform in the immediate future. This makes balance sheets an essential tool for individual and institutional investors, as well as key stakeholders within an organization and any outside regulators who need to see the status of an organization during specific periods of time.

The Balance Sheet Format

Most balance sheet formats are arranged according to this equation : Assets = Liabilities + Shareholders’ Equity

The equation above includes three broad buckets, or categories, of value which must be accounted for:

An asset is anything a company owns which holds some amount of quantifiable value, meaning that it could be liquidated and turned to cash. They're the goods and resources owned by the company.

Assets can be further broken down into current assets and non-current assets:

• Current assets —or short-term assets—are typically what a company expects to convert into cash within a year’s time, such as cash and cash equivalents, prepaid expenses, inventory, marketable securities, and accounts receivable.
• Non-current assets —also called fixed or long-term assets—are investments that a company does not expect to convert into cash in the short term, such as land, equipment, patents, trademarks, and intellectual property.

Related: 6 Ways Understanding Finance Can Help You Excel Professionally

2. Liabilities

A liability is anything a company or organization owes to a debtor. This may refer to payroll expenses, rent and utility payments, debt payments, money owed to suppliers, taxes, or bonds payable.

As with assets, liabilities can be classified as either current liabilities or non-current liabilities:

• Current or short-term liabilities are typically those due within one year, which may include accounts payable and other accrued expenses.
• Non-current or long term liabilities are typically those that a company doesn’t expect to repay within one year. They're usually long-term obligations, such as leases, bonds payable, or loans.

3. Shareholders’ Equity

Shareholders’ equity refers generally to the net worth of a company, and reflects the amount of money that would be left over if all assets were sold and liabilities paid. Shareholders’ equity belongs to the shareholders, whether they're private or public owners.

Just as assets must equal liabilities plus shareholders’ equity, shareholders’ equity can be depicted by this equation: Shareholders’ Equity = Assets - Liabilities

Does a Balance Sheet Always Balance?

A balance sheet should always balance. The name itself comes from the fact that a company’s assets will equal its liabilities plus any shareholders’ equity that has been issued. If you find that your balance sheet is not truly balancing, it may be caused by one of these culprits:

• Incomplete or misplaced data
• Incorrectly entered transactions
• Errors in currency exchange rates
• Errors in inventory
• Incorrect equity calculations
• Miscalculated loan amortization or depreciation

How to Prepare a Basic Balance Sheet

Here are five steps you can follow to create a basic balance sheet for your organization. Even if some or all of the process is automated through the use of an accounting system or software, understanding how a balance sheet is prepared will enable you to spot potential errors so that they can be resolved before they cause lasting damage.

1. Determine the Reporting Date and Period

A balance sheet is meant to depict the total assets, liabilities, and shareholders’ equity of a company on a specific date, typically referred to as the reporting date. Often, the reporting date will be the final day of the accounting period .

How Often Is a Balance Sheet Prepared?

Companies, especially publicly traded ones, prepare their balance sheet reports on a quarterly basis. When this is the case, the reporting date usually falls on the final day of the quarter. For companies that operate on a calendar year, those dates are:

• Q1: March 31
• Q2: June 30
• Q3: September 30
• Q4: December 31

Companies that report on an annual basis will often use December 31st as their reporting date, though they can choose any date.

It's not uncommon for a balance sheet to take a few weeks to prepare after the reporting period has ended.

Related: 10 Important Business Skills Every Professional Needs

2. Identify Your Assets

After you’ve identified your reporting date and period, you’ll need to tally your assets as of that date.

Typically, a balance sheet will list assets in two ways: As individual line items and then as total assets. Splitting assets into different line items will make it easier for analysts to understand exactly what your assets are and where they came from; tallying them together will be required for final analysis.

Assets will often be split into the following line items:

• Current Assets:
• Cash and cash equivalents
• Short-term marketable securities
• Accounts receivable
• Other current assets
• Non-current Assets:
• Long-term marketable securities
• Intangible assets
• Other non-current assets

Current and non-current assets should both be subtotaled, and then totaled together.

3. Identify Your Liabilities

Similarly, you will need to identify your liabilities. Again, these should be organized into both line items and totals, as below:

• Current Liabilities:
• Accounts payable
• Accrued expenses
• Deferred revenue
• Current portion of long-term debt
• Other current liabilities
• Non-Current Liabilities:
• Deferred revenue (non-current)
• Long-term lease obligations
• Long-term debt
• Other non-current liabilities

As with assets, these should be both subtotaled and then totaled together.

4. Calculate Shareholders’ Equity

If a company or organization is privately held by a single owner, then shareholders’ equity will be relatively straightforward. If it’s publicly held, this calculation may become more complicated depending on the various types of stock issued.

Common line items found in this section of the balance sheet include:

• Common stock
• Preferred stock
• Treasury stock
• Retained earnings

5. Add Total Liabilities to Total Shareholders’ Equity and Compare to Assets

To ensure the balance sheet is balanced, it will be necessary to compare total assets against total liabilities plus equity. To do this, you’ll need to add liabilities and shareholders’ equity together.

Example of a Finished Balance Sheet

It's important to note that this balance sheet example is formatted according to International Financial Reporting Standards (IFRS), which companies outside the United States follow. If this balance sheet were from a US company, it would adhere to Generally Accepted Accounting Principles (GAAP).

Related: GAAP vs. IFRS: What Are the Key Differences and Which Should You Use?

If you’ve found that your balance sheet doesn't balance, there's likely a problem with some of the accounting data you've relied on. Double check that all of your entries are correct and accurate. You may have omitted or duplicated assets, liabilities, or equity, or miscalculated your totals.

The Purpose of a Balance Sheet

Balance sheets are one of the most critical financial statements , offering a quick snapshot of the financial health of a company. Learning how to generate them and troubleshoot issues when they don’t balance is an invaluable financial accounting skill that can help you become an indispensable member of your organization.

Do you want to learn more about what's behind the numbers on financial statements? Explore our finance and accounting courses to find out how you can develop an intuitive knowledge of financial principles and statements to unlock critical insights into performance and potential.

This post was updated on May 9, 2024. It was originally published on September 10, 2019.

About the Author

What Is a Balance Sheet? Definition, Formulas, and Example

Trevor Betenson

10 min. read

Updated May 2, 2024

Business financial statements consist of three main components: the income statement , statement of cash flows , and balance sheet. The balance sheet is often the most misunderstood of these components—but also extremely beneficial if you understand how to use it.

Check out our free downloadable Balance Sheet Template for more, and keep reading to learn the different elements of a balance sheet, and why they matter.

• What is a balance sheet?

The balance sheet provides a snapshot of the overall financial condition of your company at a specific point in time. It lists all of the company’s assets, liabilities, and owner’s equity in one simple document.

A balance sheet always has to balance—hence the name. Assets are on one side of the equation, and liabilities plus owner’s equity are on the other side.

Assets = Liabilities + Equity

• What is the purpose of the balance sheet?

Put simply, a balance sheet shows what a company owns (assets), what it owes (liabilities), and how much owners and shareholders have invested (equity).

Including a balance sheet in your business plan is an essential part of your financial forecast , alongside the income statement and cash flow statement.

These statements give anyone looking over the numbers a solid idea of the overall state of the business financially. In the case of the balance sheet in particular, what it’s telling you is whether or not you’re in debt, and how much your assets are worth. This information is critical to managing your business and the creation of a business plan.

The balance sheet includes spending and income that isn’t in the income statement (also called a profit and loss statement). For example, the money you spend to repay a loan or buy new assets doesn’t show up in the income statement. And the money you take in as a new loan or a new investment doesn’t show up in the income statement either. The money you are waiting to receive from customers’ outstanding invoices shows up in the balance sheet, not the income statement.

Among other things, your balance sheet can be used to determine your company’s net worth. By subtracting liabilities from assets, you can determine your company’s net worth at any given point in time.

• Key components of the balance sheet

Typically, a balance sheet is divided into three main parts: Assets, liabilities, and owner’s equity.

Assets on a balance sheet or typically organized from top to bottom based on how easily the asset can be converted into cash. This is called “liquidity.” The most “liquid” assets are at the top of the list and the least liquid are at the bottom of the list.

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In the context of a balance sheet, cash means the money you currently have on hand. In business planning, the term “cash” represents the bank or checking account balance for the business, also sometimes referred to as “cash and cash equivalents” or “CCE.”

A cash equivalent is an asset that is liquid and can be converted to cash immediately, like a money market account or a treasury bill.

Accounts receivable

Accounts receivable is money people are supposed to pay you, but that you have not actually received yet (hence the “receivables”).

Usually, this money is sales on credit, often from business-to-business (or “B2B”) sales, where your business has invoiced a customer but has not received payment yet.

Inventory includes the value of all of the finished goods and ready materials that your business has on hand but hasn’t sold yet.

Current assets

Current assets are those that can be converted to cash within one year or less. Cash, accounts receivable, and inventory are all current assets, and these amounts accumulated are sometimes referenced on a balance sheet as “total current assets.”

Long-term assets

Long-term assets are also referred to as “fixed assets” and include things that will have a long-standing value, such as land or equipment. Long-term assets typically cannot be converted to cash quickly.

Accumulated depreciation

Accumulated depreciation reduces the value of assets over time. For example, if a business purchases a car, the car will lose value as time goes on.

Total long-term assets

Total long-term assets is used to describe long-term assets plus depreciation on a balance sheet.

Liabilities

Like assets, liabilities are ordered by how quickly a business needs to pay them off. Current liabilities are typically due within one year. Long-term liabilities are due at any point after one year.

Accounts payable

Accounts payable is the money that your business owes to other vendors, the other side of the coin to “accounts receivable.” Your accounts payable number is the regular bills that your business is expected to pay.

Pay attention to whether this number is exceedingly high, especially if your business doesn’t have enough to cover it.

Sales taxes payable

This only applies to businesses that don’t pay sales tax right away, for example, a business that pays its sales tax each quarter. That might not be your business, so if it doesn’t apply, skip it.

Short-term debt

This is debt that you have to pay back within a year—usually any short-term loan. This can also be referred to on a balance sheet as a line item called current liabilities or short-term loans. Your related interest expenses don’t go here or anywhere on the balance sheet; those should be included in the income statement.

Total current liabilities

The above numbers added together are considered the current liabilities of a business, meaning that the business is responsible for paying them within one year.

Long-term debt

These are the financial obligations that it takes more than a year to pay back. This is often a hefty number, and it doesn’t include interest. For example, this number reflects long-term loans on things like buildings or expensive pieces of equipment. It should be decreasing over time as the business makes payments and lowers the principal amount of the loan.

Total liabilities

Everything listed above that you have to pay out or back is added together.

This is the sum of all shareholder money invested in the business and accumulated business profits. Owner’s equity includes common stock, retained earnings, and paid-in-capital.

Paid-in capital

Money is paid into the company as investments. This is not to be confused with the par value or market value of stocks. This is actual money paid into the company as equity investments by owners.

Retained earnings

Earnings (or losses) that have been reinvested into the company, that have not been paid out as dividends to the owners. When retained earnings are negative, the company has accumulated losses. This can also be referred to as “shareholder’s equity.”

This doesn’t apply to all legal structures for a business; if you are a pass-through tax entity , then all profits or losses will be passed on to owners, and your balance sheet should reflect that.

Net earnings

This is an important number—the higher it is, the more profitable your company is. This line item can also be called income or net profit. Earnings are the proverbial “bottom line”: sales less costs of sales and expenses.

Total owner’s equity

Equity means business ownership, also called capital. Equity can be calculated as the difference between assets and liabilities. This can also be referred to as “shareholder’s equity” or “stockholder’s equity.”

Total liabilities and equity

This is the final equation I mentioned at the beginning of this post, assets = liabilities + equity.

• How to use the balance sheet

Your balance sheet can provide a wealth of useful information to help improve financial management. For example, you can determine your company’s net worth by subtracting your balance sheet liabilities from your assets, as noted above.

Overall, the balance sheet gives you insights into the health of your business. It’s a snapshot of what you have (assets) and what you owe (liabilities). Keeping tabs on these numbers will help you understand your financial position and if you have enough cash to make further investments in your business.

Perhaps the most useful aspect of your balance sheet is its ability to alert you to upcoming cash shortages. After a highly profitable month or quarter, for example, business owners sometimes get lulled into a sense of financial complacency if they don’t consider the impact of upcoming expenses on their cash flow .

There are two easy-to-figure ratios that can be computed from the balance sheet to help determine whether your company will have sufficient cash flow to meet current financial obligations:

Current ratio

This measures liquidity to show whether your company has enough current (i.e., liquid) assets on hand to pay bills on-time and run operations effectively. It is expressed as the number of times current assets exceeds current liabilities.

The higher the current ratio, the better. A current ratio of 2:1 is generally considered acceptable for inventory-carrying businesses, although industry standards can vary widely. The acceptable current ratio for a retail business, for example, is different from that of a manufacturer.

Current ratio formula

Current Assets / Current Liabilities

Quick ratio

This ratio is similar to the current ratio but excludes inventory. A quick ratio of 1.5:1 is generally desirable for non-inventory-carrying businesses, but—just as with current ratios—desirable quick ratios differ from industry to industry.

Quick ratio formula

Current Assets – Inventory / Current Liabilities

Knowing your industry’s standards is an important part of evaluating your business’s balance sheet effectively.

• The limits of the balance sheet

Remember, the balance sheet alone doesn’t give you a complete view of your business finances. You’ll want to keep tabs on your profit & loss statement (income statement) and cash flow as well.

Your profit & loss statement will show you the sales you are making and your business expenses and calculates your profitability. This is crucial for understanding the core economics of your business and if you’re building a profitable business, or not.

Your cash flow forecast shows how cash is moving in and out of your business and can help you predict your future cash balances. Fast growth can reduce cash quickly, especially for businesses that carry inventory, so this is a crucial statement to pay attention to as well.

The three statements all work together to provide you with a complete picture of your business. The balance sheet also helps illustrate how cash and profits are very different things .

• Example of a balance sheet

Large businesses will have longer and more complex balance sheets for their businesses, sometimes having separate balance sheets for different segments or departments of their business. A small business balance sheet will be more straightforward and have fewer line items.

Here is a balance sheet from Apple, for example. You’ll see that it includes a complex stockholder’s equity section and several specifically itemized types of long-term assets and liabilities.

Apple’s balance sheet .

You’ll also notice that it says “Period Ending” at the top; this indicates that these numbers are reflective of the time up until the date listed at the top of the column. This terminology is used when you are reporting actual values, not creating a financial forecast for the future.

• Get familiar with your balance sheet

Most companies should update their balance once a month, or whenever lenders ask for an updated balance sheet. Today’s accounting software programs will create your balance sheet for you, but it’s up to you to enter accurate information into the program to generate useful data to work from.

The balance sheet can be an extremely useful financial tool for businesses that understand how to use it properly. If you’re not as familiar with your balance sheet as you’d like to be, now might be a good time to learn more about the workings of your balance sheet and how it can help improve financial management.

Create your balance sheet easily by downloading our Balance Sheet Template , and check out our full guide to write your financial plan.

Trevor is the CFO of Palo Alto Software, where he is responsible for leading the company’s accounting and finance efforts.

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Business Plan Balance Sheet: Everything You Need to Know

Preparing a business plan balance sheet is an important part of starting your own business. 3 min read updated on September 19, 2022

Preparing a business plan balance sheet is an important part of starting your own business. The balance sheet serves as one of three crucial parts of the company's financials along with cash flow and the income statement. The basics of the balance sheet include a few straightforward parts:

• Company assets.
• Liabilities.
• Owner's equity.

The balance sheet will also include income and spending that isn't represented in the profit and loss statement. For example, it will show loan repayments and the purchase of new assets. Additionally, the money that is taken in as a new loan will not show up on the P & L either.

Accounts receivable, or the money you are waiting to receive from your customers, will show up as an asset on your balance sheet and as it is not yet reported as income on your P & L statement. A balance sheet is your business's representation of why your profits are not yet considered cash. It creates the broad financial picture of your business while the profit and loss statement will show the company's financial performance over a set length of time.

A balance sheet always has to balance. It will have assets on one side and liabilities and equity on the other. The basic formula that a balance sheet follows is Assets = Liabilities + Equity. In the end, it is the balance sheet that will show a company's net worth. To determine net worth at any given time, all you need to do is subtract the liabilities from the assets.

Balance sheets are used for planning and not accounting which is one of the principles of lean business planning. To get a useful cash flow projection, you will need to summarize the aggregate of the rows on the balance sheet. It is always important to look at a balance sheet as a tool to forecast your cash.

Components of a Balance Sheet

Just as one business will differ from another, so will the assets and liabilities of the business. Even though the titles will vary, the equation and goal remains the same. You will need to have your business assets equal your liabilities and equity .

The assets on your balance sheet will often be in order from the top to the bottom with how easy they can be converted to cash. This is called liquidity . Your most liquid assets will be on top and your least liquid on the bottom. Typically assets will be listed as follows:

• Cash — This is money currently on hands such as in checking and savings accounts. It can also include money market accounts that can be converted to cash quickly.
• Accounts Receivable — This represents money that is owed to you but has not actually been received yet. This is often credit that is extended to customers through invoicing.
• Inventory — This includes all the finished goods and materials that are ready at your place of business but has yet to be sold.
• Current Assets — These are assets that can be considered able to be converted into cash within a year or less. This includes all your cash, accounts receivable, and inventory which will all be grouped together as current assets.
• Long-Term Assets — These are fixed assets that have a long-standing value such as land and equipment. They cannot be converted to cash as quickly.
• Accumulated Depreciation — This is the value that your assets will be reduced over time due to depreciation.
• Long-Term Assets — This is the total of long-term assets plus depreciation.

Liabilities

Liabilities will be ordered for time it would take to pay them off, with current liabilities needing to be paid in a year or less and long-term liabilities longer than a year.

• Accounts Payable — This is the amount of money that your business will owe to vendors or for regular bills.
• Sales Tax Payable — If your sales tax is not paid right away, it will accrue in this account until payment is made.
• Short-Term Debt — This is usually short-term loans that will be repaid in less than a year.
• Total Current Liabilities — The total amount of debt that the business will need to pay back in a year.
• Long-Term Debt — This amount includes the financial responsibilities that will take more than a year to pay back.

If you need help with a business plan balance sheet, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Understanding a Balance Sheet (With Examples and Video)

Frances McInnis

Reviewed by

May 3, 2024

This article is Tax Professional approved

Balance sheets can help you see the big picture: the net worth of your small business, how much money you have, and where it’s kept. They’re also essential for getting investors, securing a loan , or selling your business.

So you definitely need to know your way around one. That’s where this guide comes in. We’ll walk you through balance sheets, one step at a time.

I am the text that will be copied.

What is a balance sheet?

The balance sheet is one of the three main financial statements , along with the income statement and cash flow statement .

While income statements and cash flow statements show your business’s activity over a period of time, a balance sheet gives a snapshot of your financials at a particular moment. It incorporates every journal entry since your company launched. Your balance sheet shows what your business owns (assets), what it owes (liabilities) , and what money is left over for the owners ( owner’s equity ).

Because it summarizes a business’s finances, the balance sheet is also sometimes called the statement of financial position. Companies usually prepare one at the end of a reporting period, such as a month, quarter, or year.

The purpose of a balance sheet

Because the balance sheet reflects every transaction since your company started, it reveals your business’s overall financial health. Investors, business owners, and accountants can use this information to give a book value to the business, but it can be used for so much more.

At a glance, you’ll know exactly how much money you’ve put in, or how much debt you’ve accumulated. Or you might compare current assets to current liabilities to make sure you’re able to meet upcoming payments.

The information in your company’s balance sheet can help you calculate key financial ratios, such as the debt-to-equity ratio, a metric which shows the ability of a business to pay for its debts with equity (should the need arise). Even more immediately applicable is the current ratio : current assets / current liabilities. This will tell you whether you have the ability to pay all your debts in the next 12 months.

You can also compare your latest balance sheet to previous ones to examine how your finances have changed over time. You’ll be able to see just how far you’ve come since day one.

A simple balance sheet template

You can download a simple balance sheet template here . You record the account name on the left side of the balance sheet and the cash value on the right.

What goes on a balance sheet

At a high level, a balance sheet works the same way across all business types. They are organized into three categories: assets, liabilities, and owner’s equity.

Let’s start with assets—the things your business owns that have a dollar value.

List your assets in order of liquidity , or how easily they can be turned into cash, sold or consumed. Bank accounts and other cash accounts should come first followed by fixed assets or tangible assets like buildings or equipment with a useful life longer than a year. Even intangible assets like intellectual properties, trademarks, and copyrights should be included. Anything you expect to convert into cash within a year are called current assets.

Current assets include:

• Money in a checking account
• Money in transit (money being transferred from another account)
• Accounts receivable (money owed to you by customers)
• Short-term investments
• Prepaid expenses
• Cash equivalents (currency, stocks, and bonds)

Long-term assets (or non-current assets), on the other hand, are things you don’t plan to convert to cash within a year.

Long-term assets include:

• Buildings and land
• Machinery and equipment (less accumulated depreciation )
• Intangible assets like patents, trademarks, copyrights, and goodwill (you would list the market value of what fair price a buyer might purchase these for)
• Long-term investments

Let’s say you own a vegan catering business called “Where’s the Beef”. As of December 31, your company assets are: money in a checking account, an unpaid invoice for a wedding you just catered, and cookware, dishes and utensils worth $900. Here’s how you’d list your assets on your balance sheet:

Liabilities

Next come your liabilities—your business’s financial obligations and debts.

List your liabilities by their due date. Just like assets, you’ll classify them as current liabilities (due within a year) and non-current liabilities (the due date is more than a year away). These are also known as short-term liabilities and long-term liabilities.

Your current liabilities might include:

• Accounts payable (what you owe suppliers for items you bought on credit)
• Wages you owe to employees for hours they’ve already worked
• Loans that you have to pay back within a year
• Credit card debt

And here are some non-current liabilities:

• Loans that you don’t have to pay back within a year
• Bonds your company has issued

Returning to our catering example, let’s say you haven’t yet paid the latest invoice from your tofu supplier. You also have a business loan, which isn’t due for another 18 months.

Here are Where’s the Beef’s liabilities:

Equity is money currently held by your company. This category is usually called “owner’s equity” for sole proprietorships and “stockholders’ equity” or “shareholders’ equity” for corporations. It shows what belongs to the business owners and the book value of their investments (like common stock, preferred stock, or bonds).

Owners’ equity includes:

• Capital (the amount of money invested into the business by the owners)
• Private or public stock
• Retained earnings (all your revenue minus all your expenses and distributions since launch)

Equity can also drop when an owner draws money out of the company to pay themself, or when a corporation issues dividends to shareholders.

For Where’s the Beef, let’s say you invested $2,500 to launch the business last year, and another $2,500 this year. You’ve also taken $9,000 out of the business to pay yourself and you’ve left some profit in the bank.

Here’s a summary of Where’s the Beef’s equity:

The balance sheet equation

This accounting equation is the key to the balance sheet:

Assets = Liabilities + Owner’s Equity

Assets go on one side, liabilities plus equity go on the other. The two sides must balance—hence the name “balance sheet.”

It makes sense: you pay for your company’s assets by either borrowing money (i.e. increasing your liabilities) or getting money from the owners (equity).

A sample balance sheet

We’re ready to put everything into a standard template ( you can download one here ). Here’s what a sample balance sheet looks like, in a proper balance sheet format:

Nice. Your balance sheet is ready for action.

Great. Now what do I do with it?

Because the balance sheet reflects every transaction since your company started, it reveals your business’s overall financial health. At a glance, you’ll know exactly how much money you’ve put in, or how much debt you’ve accumulated. Or you might compare current assets to current liabilities to make sure you’re able to meet upcoming payments.

You can also compare your latest balance sheet to previous ones to examine how your finances have changed over time. You’ll be able to see just how far you’ve come since day one. If you need help understanding your balance sheet or need help putting together a balance sheet, consider hiring a bookkeeper .

Here’s some metrics you can calculate using your balance sheet:

• Debt-to-equity ratio (D/E ratio): Investors and shareholders are interested in the D/E ratio of a company to understand whether they raise money through investment or debt. A high D/E ratio shows a business relies heavily on loans and financing to raise money.
• Working capital : This metric shows how much cash you would hold if you paid off all your debts. It signals to investors and lenders how capable you are to pay down your current liabilities.
• Return on Assets: A formula for calculating how much net income is being earned relative to the assets owned. The more income earned relative to the amount of assets, the higher performing a business is considered to be.

Next, we’ll cover the three most important ratios that you can calculate using your balance sheet: the current ratio, the debt-to-equity ratio, and the quick ratio.  

The current ratio

Can your company pay its debts? The current ratio measures the liquidity of your company—how much of it can be converted to cash, and used to pay down liabilities. The higher the ratio, the better your financial health in terms of liquidity .

The ratio for finding your current ratio looks like this:

Current Ratio = Current Assets / Current Liabilities

You should aim to maintain a current ratio of 2:1 or higher. Meaning, your company holds twice as much value in assets as it does in liabilities. If you had to, you could pay off all the money you owe two times over.

Once you drop below a current ratio of 2:1, your liquidity isn’t looking so good. And if you dip below 1:1, you’re entering hot water. That means you don’t have enough liquidity to pay off your debts.

You can improve your current ratio by either increasing your assets or decreasing your liabilities.

The quick ratio

Also called the acid test ratio, the quick ratio describes how capable your business is of paying off all its short-term liabilities with cash and near-cash assets. In this case, you don’t include assets like real estate or other long-term investments. You also don’t include current assets that are harder to liquidate, like inventory. The focus is on assets you can easily liquidate.

Here’s how you get the quick ratio:

Quick Ratio = (Cash and Cash Equivalents + Marketable Securities + Accounts Receivable) / Current Liabilities

If your ratio is 1:1 or better, you’re sitting pretty. That means you’ve got enough quick-to-liquidate assets to cover all your short term liabilities in a pinch.

The debt-to-equity ratio

Similar to the current ratio and quick ratio, the debt-to-equity ratio measures your company’s relationship to debt. Only, in this case, the key value is your total equity.

This ratio tells you how much your company depends upon equity to keep running versus how much it depends on outside lenders. It’s calculated like this:

Debt to Equity Ratio = Total Outside Liabilities / Owner or Shareholders’ Equity

Generally speaking, a 2:1 ratio is considered acceptable. If the ratio gets bigger, you start running into trouble. It means your business relies heavily on debt to keep running, which turns off investors. The higher the ratio, the higher the chance that, in the event you need to pay off your debt, you’ll use up all your earnings and cash flows—and investors will end up empty-handed.

Examples of balance sheet analysis

We’ll do a quick, simple analysis of two balance sheets, so you can get a good idea of how to put financial ratios into play and measure your company’s performance.

Annie’s Pottery Palace, a large pottery studio, holds a lot of its current assets in the form of equipment—wheels and kilns for making pottery. Accounts receivable play a relatively minor role.

Liabilities are few—a small loan to pay off within the year, some wages owed to employees, and a couple thousand dollars to pay suppliers.

Annie’s is a single-member LLC—there are no shareholders, so her equity includes only her initial investment, retained earnings, and Annie’s draw($4,000).

Ratio analysis:

Current ratio: 22,000 / 7,000 = 3.14:1

Annie’s current ratio is very healthy. If necessary, her current assets could pay off her current liabilities more than three times over.

Quick ratio: 6,000 / 7,000 = 0.85:1

Her quick ratio isn’t looking so hot, though. Annie’s currently sitting just below 1:1, meaning she wouldn’t be able to quickly pay off debt.

Debt-to-equity ratio: 7,000 / 15,000 = 0.46:1

Annie’s debt-to-equity looks good. She’s got more than twice as much owner’s equity than she does outside liabilities, meaning she’s able to easily pay off all her external debt.

Final analysis:

Annie is able to cover all of her liabilities comfortably—until we take her equipment assets out of the picture. Most of her assets are sunk in equipment, rather than quick-to-cash assets. With this in mind, she might aim to grow her easily liquidated assets by keeping more cash on hand in the business checking account.

That being said, her owner’s equity is more than capable of covering her debt, so this problem shouldn’t be difficult to fix. It would be wise for Annie to take care of it before applying for loans or bringing on investors.

Example balance sheet analysis: Bill’s Book Barn LTD.

A lot of Bill’s assets are tied up in inventory—his large collection of books. The rest mostly consists of long-term investments and intangible assets. (Bill’s Book Barn is famous among collectors of rare fly-tying manuals; a business consultant valued his list of dedicated returning customers at $10,000.)

He doesn’t have a lot of liabilities compared to his assets, and all of them are short-term liabilities. Meaning, he’ll need to pay off that $17,000 within a year.

Finally, since Bill is incorporated, he has issued shares of his business to his brother Garth. Currently, Garth holds a $12,000 share in the business, a little shy of half its total equity.

Ratio analysis

Current ratio: 30,000 / 17,000 = 1.76:1

Since long-term investments and intangible assets are tough to liquidate, they’re not included in current assets—meaning Bill has $30,000 in assets he can more or less easily use to cover his liabilities. His ratio of 1.76:1 isn’t great—it doesn’t leave much wiggle room if he wants to pay off his liabilities. But it isn’t terrible, either—he’s just shy of a healthy 2:1 ratio.

Quick ratio: 7,000 / 17,000 = 0.41:1

Bill’s quick ratio is pretty dire—he’s well short of paying off his liabilities with cash and cash equivalents, leaving him in a bind if he needs to take care of that debt ASAP.

Debt-to-equity ratio: 17,000 / 15,000 = 1.13:1

Once we take into account his $13,000 owner’s draw, Bill’s owner’s equity comes to just $15,000, shy of his $17,000 in debt. Remember, an acceptable debt-to-equity ratio is 2:1. Bill is falling short of acceptable; if he had to pay off all his debts quickly, his equity wouldn’t cover it, and he’d need to dip into his company’s income. That makes his business unattractive to potential investors. Unless he changes course, Bill will have trouble getting financing for his business in the future.

Summary Analysis

Bill’s ratios don’t look great, but there’s hope. If he starts liquidating some of his long-term investments now, he can bump his current ratio up to 2:1, meaning he’d be in a healthy position to pay off liabilities with his current assets.

His quick ratio will take more work to improve. A lot of Bill’s assets are tied up in inventory. If he could convert some of that inventory to cash, he could improve his ability to pay of debt quickly in an emergency. He may want to take a look at his inventory, and see what he can liquidate. Maybe he’s got shelves full of books that have been gathering dust for years. If he can sell them off to another bookseller as a lot, maybe he can raise the $10,000 cash to become more financially stable.

Finally, unless he improves his debt-to-equity ratio, Bill’s brother Garth is the only person who will ever invest in his business. The situation could be improved considerably if Bill reduced his $13,000 owner’s draw. Unfortunately, he’s addicted to collecting extremely rare 18th century guides to bookkeeping. Until he can get his bibliophilia under control, his equity will continue to suffer.

Balance sheets can tell you a lot of information about your business, and help you plan strategically to make it more liquid, financially stable, and appealing to investors. But unless you use them in tandem with income statements and cash flow statements, you’re only getting part of the picture. Learn how they work together with our complete guide to financial statements .

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• Write Your Business Plan | Part 1 Overview Video
• The Basics of Writing a Business Plan
• How to Use Your Business Plan Most Effectively
• 12 Reasons You Need a Business Plan
• The Main Objectives of a Business Plan
• What to Include and Not Include in a Successful Business Plan
• The Top 4 Types of Business Plans
• A Step-by-Step Guide to Presenting Your Business Plan in 10 Slides
• 6 Tips for Making a Winning Business Presentation
• 3 Key Things You Need to Know About Financing Your Business
• 12 Ways to Set Realistic Business Goals and Objectives
• How to Perfectly Pitch Your Business Plan in 10 Minutes
• Write Your Business Plan | Part 2 Overview Video
• How to Fund Your Business Through Friends and Family Loans and Crowdsourcing
• How to Fund Your Business Using Banks and Credit Unions
• How to Fund Your Business With an SBA Loan
• How to Fund Your Business With Bonds and Indirect Funding Sources
• How to Fund Your Business With Venture Capital
• How to Fund Your Business With Angel Investors
• How to Use Your Business Plan to Track Performance
• How to Make Your Business Plan Attractive to Prospective Partners
• Is This Idea Going to Work? How to Assess the Potential of Your Business.
• When to Update Your Business Plan
• Write Your Business Plan | Part 3 Overview Video
• How to Write the Management Team Section to Your Business Plan
• How to Create a Strategic Hiring Plan
• How to Write a Business Plan Executive Summary That Sells Your Idea
• How to Build a Team of Outside Experts for Your Business
• Use This Worksheet to Write a Product Description That Sells
• What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
• How to Raise Money With Your Business Plan
• Customers and Investors Don't Want Products. They Want Solutions.
• Write Your Business Plan | Part 4 Overview Video
• 5 Essential Elements of Your Industry Trends Plan
• How to Identify and Research Your Competition
• Who Is Your Ideal Customer? 4 Questions to Ask Yourself.
• How to Identify Market Trends in Your Business Plan
• How to Define Your Product and Set Your Prices
• How to Determine the Barriers to Entry for Your Business
• How to Get Customers in Your Store and Drive Traffic to Your Website
• How to Effectively Promote Your Business to Customers and Investors
• Write Your Business Plan | Part 5 Overview Video
• What Equipment and Facilities to Include in Your Business Plan
• How to Write an Income Statement for Your Business Plan
• How to Make a Balance Sheet
• How to Make a Cash Flow Statement
• How to Use Financial Ratios to Understand the Health of Your Business
• How to Write an Operations Plan for Retail and Sales Businesses
• How to Make Realistic Financial Forecasts
• How to Write an Operations Plan for Manufacturers
• What Technology Needs to Include In Your Business Plan
• How to List Personnel and Materials in Your Business Plan
• The Role of Franchising
• The Best Ways to Follow Up on a Buisiness Plan
• The Best Books, Sites, Trade Associations and Resources to Get Your Business Funded and Running
• How to Hire the Right Business Plan Consultant
• Business Plan Lingo and Resources All Entrepreneurs Should Know
• How to Write a Letter of Introduction
• What To Put on the Cover Page of a Business Plan
• How to Format Your Business Plan
• 6 Steps to Getting Your Business Plan In Front of Investors

How to Make a Balance Sheet Create this important document to show investors the true net worth of your business, and to keep track of your financial trajectory.

By Eric Butow Oct 27, 2023

Key Takeaways

• What a balance sheet should include
• Why you should compare balance sheets year after year

Opinions expressed by Entrepreneur contributors are their own.

This is part 4 / 12 of Write Your Business Plan: Section 5: Organizing Operations and Finances series.

If the income sheet shows what you're earning, the balance sheet shows what you're worth. A balance sheet can help an investor see that a company owns valuable assets that don't show up on the income statement or that it may be profitable but is heavily in debt. It adds up everything your business owns, subtracts everything the business owes, and shows the difference as the net worth of the business.

Actually, accountants put it differently and, of course, use different names. The things you own are called assets. The things you owe money on are called liabilities. And net worth is referred to as equity.

Related: How to Calculate Your Net Worth and Grow Your Wealth

A balance sheet shows your condition on a given date, usually the end of your fiscal year. Sometimes balance sheets are compared. That is, next to the figures for the end of the most recent year, you place the entries for the end of the prior period. This gives you a snapshot of how and where your financial position has changed.

A balance sheet also places a value on the owner's equity in the business. When you subtract liabilities from assets, what's left is the value of the equity in the business owned by you and any partners. Tracking changes in this number will tell you whether you're getting richer or poorer.

An asset is basically anything you own of value. It gets a little more complicated in practice, but that's the working definition.

Assets come in two main varieties: current assets and fixed assets. Current assets are anything that is easily liquidated or turned into cash. They include cash, accounts receivables, inventory, marketable securities, and the like.

Related: How to Write an Income Statement for Your Business Plan

Fixed assets include stuff that is harder to turn into cash. Examples are land, buildings, improvements, equipment, furniture, and vehicles.

The fixed asset part of the balance sheet sometimes includes a negative value—that is, a number you subtract from the other fixed asset values. This number is depreciation, and it's an accountant's way of slowly deducting the cost of a long-lived asset such as a building or a piece of machinery from your fixed asset value.

Intellectual properties, such as patents and copyrights, also fall into the asset category. For some companies, a recipe, a formula, or a new invention may actually be their most valuable asset. Of course, the actual value is often very hard to determine. Patents, trademarks, copyrights, exclusive distributorships, protected franchise agreements, and the like do have somewhat more accessible value.

Related: Net Worth Calculator for Franchises

You'll also have intangibles such as your reputation, your standing in the community, and "goodwill," which are difficult to put a value on. Probably the best way to think of goodwill is like this: If you sell your company, the IRS says the part of the sales price that exceeds the value of the assets is goodwill. As a result of its slipperiness, some planners never include an entry for goodwill, although its value may in fact be substantial.

Liabilities

Liabilities are the debts your business owes. They come in two classes: short-term and long-term.

Short-term liabilities are also called current liabilities. Any debt that is going to be paid off within twelve months is considered current. That includes accounts payable you owe suppliers, short-term bank loans (shown as notes payable), and accrued liabilities you have built up for such things as wages, taxes, and interest.

Related: Tips and Strategies for Using the Balance Sheet as Your Franchise Scorecard

Any debt that you won't pay off in a year is long-term. Mortgages and bank loans with more than a one-year term are considered in this class.

A Note on Land

Almost anything can lose value, but for accounting purposes, land doesn't. As a rule, you never depreciate land, although you may depreciate buildings as well as other long-lived purchases.

Buzzword: Book Value

The book value of the business is the net worth (or owner's equity). Most valuation methods for small and midsized businesses use the net worth plus adjusted earnings or free cash flow multiple to create a rough and ready valuation. If you are just starting out, you will probably feel that you are undervalued because you have nothing on which to base your value. Don't fret: Value grows with time as you build your business. It's better that the value of your business honestly reflects your business. If you recall the dot-com crash of 2000, it was largely the result of many up-and-coming dot-coms being greatly overvalued.

Related: How to Make a Cash Flow Statement

Tax Considerations

You always want to maximize profits, right? Savvy entrepreneurs know that managing reported profits can save on taxes. Part of the trick is balancing salaries, dividends, and retained earnings.

Tax regulations treat each differently, and you can't exactly do whatever you want. Get good advice and be ready to sacrifice reported profits for real savings.

Personal Financial Statement

Investors and lenders like to see business plans with substantial investments by the entrepreneur or with an entrepreneur who is personally guaranteeing any loans and has the personal financial strength to back those guarantees. Your personal financial statement is where you show plan readers how you stack up financially as an individual.

Related: The Definition of Value Is Changing — Here's What Entrepreneurs Need to Know to Survive the Shifting Global Trends

The personal financial statement comes in two parts. One is similar to a company balance sheet and lists your liabilities and assets. A net worth figure at the bottom, like the net worth figure on a company balance sheet, equals total assets minus total liabilities.

A second statement covers your personal income. It is similar to a company profit and loss statement, listing all your personal expenses, such as rent or mortgage payments, utilities, food, clothing, and entertainment. It also shows your sources of income, including earnings from a job, income from another business you own, child support or alimony, interest and dividends, and the like.

The figure at the bottom is your net income; it equals total income minus total expenses. If you've ever had to fill out a personal financial statement to borrow money for a car loan or home mortgage, you've had experience with a personal financial statement. You should be able to simply update figures from a previous personal financial statement.\

Related: How to Make Realistic Financial Forecasts

Because this is important only to investors or lenders, you want to be careful to include this only when necessary. For a small business looking for a small amount of funding, you may be able to draft something with your accountant verifying your net worth and/or previous year's income.

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

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How to make a balance sheet: A step-by-step guide

Building a balance sheet is an important practice that must be conducted on either a quarterly or monthly basis. This financial statement provides insight into your company’s financial health by detailing your assets, liabilities, and shareholders’ equity.    

Not sure how to create a balance sheet? Below, we’ll delve into the purpose of creating balance sheets (also known as net worth statements) and then provide a step-by-step guide of how to make your own. P.S. For more templates, check out our Accounting Documents Library .

What is a balance sheet?

An accounting balance sheet is a snapshot of your company’s financial situation. Balance sheets help with financial planning and give businesses visibility into company assets, liabilities, and owner’s equity. It’s one of the three fundamental financial statements that every business owner needs to have in order to perform financial modeling and accounting—the other two documents being an income statement and cash flow statement. 

At its essence, an accounting balance sheet is one of the most accurate ways to analyze the company’s financial position. When fleshed out, a balance sheet can show you:

• What the business owns
• What the business owes ‍
• How much has been invested into the company  

As the name suggests, your company’s assets must always be equal to the combined value of your liabilities and equity. Some businesses use hedge accounting to reduce volatility impact in financial statements, however, the sheet must be balanced. If either is out of alignment, your calculations or notations are incorrect. According to Harvard University : “A balance sheet is a financial statement that communicates the so-called ’book value’ [assets - liabilities] of an organization, as calculated by subtracting all of the company’s liabilities and shareholder equity from its total assets.”

What’s the difference between a balance sheet and an income statement?

An income statement, also called a profit and loss (P&L) statement, lists out a company’s revenue streams (such as sales) and expenses (payroll, operating expenses, etc.) over a given period of time.

A balance sheet, on the other hand, covers a company’s assets (cash, outstanding receivables, securities, inventory, etc.) and liabilities (outstanding payables, debt payments, taxes, rent, etc.) at a certain point of time. ‍

These two statements provide complementary information. An income statement tells you a company’s profitability, margins, and revenue over a period of time, while a company’s balance sheet gives you a snapshot of their overall financial health and solvency at a certain point.

The purpose of a balance sheet 

A balance sheet is a snapshot of the company’s financial position at a specific point in time. It’s a critical measurement both internally and externally, but for different reasons: 

Internal analysis

Balance sheets help you see whether a business is succeeding or struggling. By analyzing your liquidity position (i.e. cash and receivables), you’ll see whether you can afford upcoming expenses or handle a market shock. Additionally, you can analyze historical trends in your assets and liabilities to ensure your business is running properly, or to identify problem areas quickly. If the numbers don’t look good, it can prompt an internal shift in how you conduct the business. 

External evaluation

Balance sheets are a tool that help investors, lenders, stakeholders, and external regulators gauge the financial position of a business, what resources are currently available, and how they were financed. For investors, this can help them see whether or not it would be smart to invest in the company. They can extrapolate upon these numbers to determine other financial performance metrics like debt-to-equity ratio, equity multiplier , profitability, and liquidity. For external auditors, a balance sheet can help them confirm that the company is complying with reporting laws. 

What’s on a balance sheet?

Practically every balance sheet boils down to the following equation: 

Assets = Liabilities + Shareholder’s equity 

In addition, this equation is tied to a particular date, known as the “reporting date.” Although it depends on your business, in most cases, a balance sheet should be prepared and then distributed at least on a quarterly basis, if not monthly. Larger businesses will often create monthly balance sheets, while small businesses or startups typically create them quarterly. 

Balance sheets are made up of three key elements:

The asset section of a balance sheet reveals what items of value your business owns. These assets are typically arranged by order of liquidity—in other words, how easily they can be converted into cash. This typically breaks down further into two categories of assets:

Current assets

Assets that could likely be converted into cash within a year. These have various sub categories, including:

• Cash and cash equivalents – Your most liquid assets —cash, checks, and money kept in your bank account.    ‍
• Accounts receivable – Money your clients owe that will be paid in the near future.  ‍
• Marketable securities – Traded investments that you can easily sell off.  ‍
• Prepaid expenses – Valuables you’ve already paid for such as insurance or rent.   ‍
• Inventory – Equipment, raw materials, and finished products. 

Long-term assets

According to Investopedia , long-term assets (also called non liquid or illiquid assets and non-current assets) are defined as “a company's value of property, plant, and equipment that can be used for more than 1 year, minus depreciation.” These include:  

• Fixed assets – Property, buildings, equipment, and machinery.  ‍
• Intangible assets – Nonphysical assets such as patents, copyrights, licenses, and franchise agreements.  ‍
• Long-term securities – Investments that can't be sold off within a year such as bonds or real estate.

2. Liabilities 

The liability section of the balance sheet demonstrates what money you currently owe to others, this includes recurring expenses and various forms of debt. Liabilities are broken down into two subcategories. They are either long-term liabilities (also called non-current liabilities) or current liabilities.

• Current liabilities – Utilities, taxes, rent, accounts payable, and payments toward long-term debt interest such as business loans or credit cards. ‍
• Long-term liabilities – Bonds payable and long-term debts.  

See our guide on how to calculate liabilities for more info.

3. Shareholder’s equity 

The shareholder's equity section of the balance sheet shows the value of funds that shareholders have invested in the company as well as retained earnings . For retained earnings, the company must pay out dividends from the net income. Shareholders’ Equity = Total Assets – Total Liabilities.

How to make a balance sheet in 8 steps

Now that you know what’s in a balance sheet, how do you make your own? Follow these steps:

Step 1: Pick the balance sheet date

A balance sheet is meant to show all of your business assets, liabilities, and shareholders’ equity on a specific day of the year, or within a given period of time. Most companies prepare reports on a quarterly basis, typically on the last day of March, June, September, and December. Companies may also choose to prepare balance sheets on a monthly basis, in which case they would report on the last day of each month.  

Step 2: List all of your assets

Once you’ve set a date, your next task is to list out all of your current asset items in separate line items. To make this section more actionable, it’s best to separate them in order of liquidity. More liquid items like cash and accounts receivable go first, whereas illiquid assets like inventory will go last. After listing a current asset, you’ll then need to include your non-current (long-term) ones. Don’t forget to include non-monetary assets as well. 

Step 3: Add up all of your assets

After detailing your various asset categories, add them all up. The final tally will then go under the total assets category. To ensure that your numbers are correct, double check this figure against the company’s general ledger. 

Step 4: Determine current liabilities

List the current liabilities that are due within a year of the balance sheet date. These include accounts payable, short-term notes payable, and accrued liabilities. 

Step 5: Calculate long-term liabilities

List the liabilities that won’t be settled within the year. These include long-term notes, bonds payable, pension plans, and mortgages.

Step 6: Add up liabilities

Add up the current liabilities subtotal with the long-term liabilities subtotal to find your total liabilities.

Step 7: Calculate owner’s equity

Determine your business’ retained earnings and working capital, as well as the total shareholders’ equity. Retained earnings are the business’ profits which are reserved for reinvestments (not distributed as dividends to shareholders). Shareholders’ equity is the combination of share capital plus retained earnings. 

Step 8: Add up liabilities and owners’ equity

If your liabilities + equity = assets, you’ve performed the balance correctly. If it doesn’t, you may have to go back and review your work.

Ramp: greater visibility & helping you close books faster

By building your three core financial statements (balance sheet, income statement, and cash flow statement) into your calendar, you’ll enjoy greater visibility into your company’s financial future which can help make better business and financial decisions. However, building balance sheets on a quarterly or monthly basis can be a time-consuming process even with accounting software or bookkeeping software.

That’s where Ramp comes in.

Ramp is the only corporate card that can help you streamline the balance sheet creation process and close books faster at the end of the month. This is accomplished thanks to the automated expense management and real-time spend tracking platform built into the card. With Ramp on your team, it’s easier to create a balance sheet and close your books faster.

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What Is A Balance Sheet? (Example Included)

Updated: Jun 1, 2024, 2:22pm

Table of Contents

What is a balance sheet, components of a balance sheet, how to balance a balance sheet, why is a balance sheet important, balance sheet example, frequently asked questions (faqs).

When you’re starting a company, there are many important financial documents to know. It might seem overwhelming at first, but getting a handle on everything early will set you up for success in the future. Today, we’ll go over what a balance sheet is and how to master it to keep accurate financial records.

A balance sheet is a comprehensive financial statement that gives a snapshot of a company’s financial standing at a particular moment. A balance sheet covers a company’s assets as defined by its liabilities and shareholder equity.

Balance Sheet Time Periods

When investors ask for a balance sheet, they want to make sure it’s accurate to the current time period. They might want to see a past balance sheet as well. It’s important to keep accurate balance sheets regularly for this reason.

Assets are any resources your company owns that holds value. When setting up a balance sheet, you should order assets from current assets to long-term assets. Long-term assets can’t be converted immediately into cash on hand. They’re important to include, but they can’t immediately be converted into liquid capital.

There are a few different types of assets to list that your company probably has on-hand:

• Liquid assets: Cash and cash equivalents, such as certificates of deposit (CDs)
• Accounts receivable (A/R): Money owed to your company
• Marketable securities: Liquid assets that are readily convertible into cash (generally reported under cash and cash equivalents)
• Inventory: Any products you have available for sale
• Prepaid expenses: Rent, insurance and contracts with vendors

These are examples of long-term assets:

• Investments or securities that can’t be liquidated within the next year
• Fixed assets: Land, machinery and buildings
• Intangible assets: Intellectual property, brand awareness and company reputation

Want more information? Here’s everything you need to know about assets .

Liabilities

A liability is money that your company owes to any outside entity. Liabilities refer to basic aspects of your business: taking in money, loans, providing services and everything else your business does.

Liabilities are categorized as current and long-term as well. Current liabilities are customer prepayments for which your company needs to provide a service, wages, debt payments and more.

On the other hand, long-term liabilities are long-term debts like interest and bonds, pension funds and deferred tax liability.

Shareholder Equity

Finally, shareholder equity refers to your company’s net assets. The shareholder equity comprises the following:

• Money generated by a company
• Money put into the business by its owners and shareholders
• Any other capital put into the business

You can calculate total equity by subtracting liabilities from your company’s total assets.

When creating a balance sheet, start with two sections to make sure everything is matching up correctly. On one side, you’ll have the business’s assets. On the other side, you’ll put the company’s liabilities and shareholder equity.

The numbers should match up exactly: the total assets must be equal to the liabilities and shareholder assets. If these numbers aren’t the same, there might be an issue with your calculations or a missing asset or liability. Before sharing with any possible investors, make sure to check over your balance sheet several times.

Balance sheets are important because they give a picture of your company’s financial standing. Before getting a business loan or meeting with potential investors, a company has to provide an up-to-date balance sheet. A potential investor or loan provider wants to see that the company is able to keep payments on time.

Department heads can also use a balance sheet to understand the financial health of the company. Looking at the balance sheet and its components helps them keep track of important payments and how much cash is available on hand to pay these vendors.

Overall, a balance sheet is an important statement of your company’s financial health, and it’s important to have accurate balance sheets available regularly.

This is an example of a basic balance sheet and what’s included.

Download Balance Sheet Example

In this example, the imagined company had its total liabilities increase over the time period between the two balance sheets and consequently the total assets decreased.

Bottom Line

A balance sheet is a financial document that you should work on calculating regularly. If there are discrepancies, that means you’re missing important information for putting together the balance sheet.

Why do we need a balance sheet?

The balance sheet is a report that gives a basic snapshot of the company’s finances. This is an important document for potential investors and loan providers.

How do I calculate a balance sheet?

The formula is very basic: total assets = total liabilities + total equity. If you have questions about the individual components of the balance sheet, you might have to consult a finance expert.

What is the best accounting software for small businesses?

There are a number of high-quality accounting software solutions available. The overall best include OnPay, Gusto and QuickBooks. To find out which is the right option for your business, check out our article detailing the best accounting software for small businesses .

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Julia is a writer in New York and started covering tech and business during the pandemic. She also covers books and the publishing industry.

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How to Write the Financial Section of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Taking Stock of Expenses

The income statement, the cash flow projection, the balance sheet.

The financial section of your business plan determines whether or not your business idea is viable and will be the focus of any investors who may be attracted to your business idea. The financial section is composed of four financial statements: the income statement, the cash flow projection, the balance sheet, and the statement of shareholders' equity. It also should include a brief explanation and analysis of these four statements.

Think of your business expenses as two cost categories: your start-up expenses and your operating expenses. All the costs of getting your business up and running should be considered start-up expenses. These may include:

• Business registration fees
• Business licensing and permits
• Starting inventory
• Rent deposits
• Down payments on a property
• Down payments on equipment
• Utility setup fees

Your own list will expand as soon as you start to itemize them.

Operating expenses are the costs of keeping your business running . Think of these as your monthly expenses. Your list of operating expenses may include:

• Salaries (including your own)
• Rent or mortgage payments
• Telecommunication expenses
• Raw materials
• Distribution
• Loan payments
• Office supplies
• Maintenance

Once you have listed all of your operating expenses, the total will reflect the monthly cost of operating your business. Multiply this number by six, and you have a six-month estimate of your operating expenses. Adding this amount to your total startup expenses list, and you have a ballpark figure for your complete start-up costs.

Now you can begin to put together your financial statements for your business plan starting with the income statement.

The income statement shows your revenues, expenses, and profit for a particular period—a snapshot of your business that shows whether or not your business is profitable. Subtract expenses from your revenue to determine your profit or loss.

While established businesses normally produce an income statement each fiscal quarter or once each fiscal year, for the purposes of the business plan, an income statement should be generated monthly for the first year.

Not all of the categories in this income statement will apply to your business. Eliminate those that do not apply, and add categories where necessary to adapt this template to your business.

If you have a product-based business, the revenue section of the income statement will look different. Revenue will be called sales, and you should account for any inventory.

The cash flow projection shows how cash is expected to flow in and out of your business. It is an important tool for cash flow management because it indicates when your expenditures are too high or if you might need a short-term investment to deal with a cash flow surplus. As part of your business plan, the cash flow projection will show how  much capital investment  your business idea needs.

For investors, the cash flow projection shows whether your business is a good credit risk and if there is enough cash on hand to make your business a good candidate for a line of credit, a  short-term loan , or a longer-term investment. You should include cash flow projections for each month over one year in the financial section of your business plan.

Do not confuse the cash flow projection with the cash flow statement. The cash flow statement shows the flow of cash in and out of your business. In other words, it describes the cash flow that has occurred in the past. The cash flow projection shows the cash that is anticipated to be generated or expended over a chosen period in the future.

There are three parts to the cash flow projection:

• Cash revenues: Enter your estimated sales figures for each month. Only enter the sales that are collectible in cash during each month you are detailing.
• Cash disbursements: Take the various expense categories from your ledger and list the cash expenditures you actually expect to pay for each month.
• Reconciliation of cash revenues to cash disbursements: This section shows an opening balance, which is the carryover from the previous month's operations. The current month's revenues are added to this balance, the current month's disbursements are subtracted, and the adjusted cash flow balance is carried over to the next month.

The balance sheet reports your business's net worth at a particular point in time. It summarizes all the financial data about your business in three categories:

• Assets :  Tangible objects of financial value that are owned by the company.
• Liabilities: Debt owed to a creditor of the company.
• Equity: The net difference when the  total liabilities  are subtracted from the total assets.

The relationship between these elements of financial data is expressed with the equation: Assets = Liabilities + Equity .

For your  business plan , you should create a pro forma balance sheet that summarizes the information in the income statement and cash flow projections. A business typically prepares a balance sheet once a year.

Once your balance sheet is complete, write a brief analysis for each of the three financial statements. The analysis should be short with highlights rather than in-depth analysis. The financial statements themselves should be placed in your business plan's appendices.

Free Balance Sheet Templates

By Andy Marker | January 7, 2019 (updated August 7, 2024)

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We’ve compiled free, printable, customizable balance sheet templates for project managers, analysts, executives, regulators, and investors. Use these balance sheet templates as financial statements to keep tabs on your assets (what you own) and liabilities (what you owe) to determine your equity. 

Included on this page, you'll find many helpful balance sheet templates, such as a basic balance sheet template , a pro forma balance sheet template , a monthly balance sheet template , an investment property balance sheet template , and a daily balance sheet template , among others. Plus, find tips on how to use balance sheet templates .

Basic Balance Sheet Template

Download a Basic Balance Sheet Template for  Excel | Google Sheets | Smartsheet

Use this simple, easy-to-complete balance sheet template to determine your overall financial outlook. Enter the details of your current fixed and long-term assets and your current and long-term liabilities. The template will then calculate your resulting balance or net worth. Save this printable template as a year-by-year balance sheet, or easily customize it to be a day-by-day or month-by-month balance sheet. Enter projected figures to see your financial position compared to your financial goals. 

For an easy-to-use online balance sheet template, see this basic balance sheet template .

Pro Forma Balance Sheet Template

Download a Sample Pro Forma Balance Sheet Template for  Excel | Adobe PDF | Google Sheets | Smartsheet

Download a Blank Pro Forma Balance Sheet Template for  Excel | Adobe PDF | Google Sheets 

Use this balance sheet for your existing businesses, or enter projected data for your business plan. Annual columns provide year-by-year comparisons of current and fixed assets, as well as current short-term and long-term liabilities. By reviewing this information, you can easily determine your company’s equity. This balance sheet template includes tallies of your net assets — or net worth — and your working capital. Download the sample template for additional guidance, or fill out the blank version to provide a financial statement to investors or executives. 

Download one of these free small business balance sheet templates to help ensure that your small business is on track financially.

Monthly Balance Sheet Template

Download a Monthly Balance Sheet Template for  Excel | Google Sheets 

Ensure that you meet your financial obligations and solvency goals with this easy-to-use monthly balance sheet template. Enter your assets — including cash, value of inventory, and short-term and long-term investments — as well as liabilities and owner’s equity. Completing the form will provide you with an accurate picture of your finances. This template also includes a Common Financial Ratio section, which calculates month-by-month debt ratio, working capital assets-to-equity ratio, and debt-to-equity ratio so that you can accurately evaluate your company’s financial health. 

For additional tips and resources for your organization’s financial planning, see our comprehensive collection of free financial templates for business plans .

Investment Property Balance Sheet Template

Download an Investment Property Balance Sheet Template for  ‌Excel | Google Sheets  

Designed with secondary or investment properties in mind, this comprehensive balance sheet template allows you to factor in all details relating to your investment property’s growth in value. You can easily factor in property costs, expenses, rental and taxable income, selling costs, and capital gains. Also factor in assumptions, such as years you plan to stay invested in the property, and actual or projected value increase. You can also edit the template to include whatever details you need to provide for renting, refinancing, home-equity lines, and possible eventual sale of your investment property.

Daily Balance Sheet Template

Download a Daily Balance Sheet Template for  ‌Excel | Google Sheets 

Keep day-to-day tabs on your assets, liabilities, equity, and balance with this easy-to-use, daily balance sheet template. Enter your total current, fixed, and other assets, total current and long-term liabilities, and total owner’s equity, and the template will automatically calculate your up-to-the-minute balance. You can save this daily balance sheet template as individual files — with customized entries — for each day requiring balance insights for any 24-hour period.

Find more balance sheets and accounting templates in this collection of the top Excel templates for accounting .

Quarterly Balance Sheet Template

Download a Quarterly Balance Sheet Template for  Excel | Google Sheets  

Track your quarterly financial position by entering each month’s assets and liabilities and reviewing the monthly and quarterly perspectives of your owner’s equity. Monthly columns provide you with assets, liabilities, and equity tallies, and also reflect three-month figures for each quarter. This is the perfect template for short-term analysis of fiscal health but can be used for year-over-year monthly and quarterly comparisons.

What Is a Balance Sheet Template?

A balance sheet template is a tool for tallying your assets and liabilities so that you can calculate your equity. Use a balance sheet template to ensure you have sufficient funds to meet and exceed your financial obligations.

Companies, organizations, and individuals use balance sheets to easily calculate their equity, profits, or net worth by subtracting their liabilities from their assets. By doing so, they can get an overall picture of their financial health. A balance sheet also serves as a company or organization’s financial position over specified time, such as daily, monthly, quarterly, or yearly. 

Regardless of the type of balance sheet (simple, business-related, or calendar-specific), they all use the same simple formula:

Whereas a simple balance sheet template allows you to easily fill in the basic assets and liabilities information for a quick glimpse at your financial outlook, a more robust template, such as a pro forma business balance sheet , is useful for entering current assets details, such as accounts receivable and inventory details. 

Regardless of your line of business, all balance sheet templates have standard, pre-set formulas that factor in the following details to keep your financial details balanced and accurate:

• Current Assets: Current assets can be converted to cash within a short period of time and include checking and savings account balances, accounts receivable, inventory, prepaid expenses, short-term investments, and other liquid assets.
• Fixed Assets: Fixed assets , such as property, cars, equipment, stocks and bonds, and intangible assets, take time and effort to convert into liquid cash.
• Total Assets: Your total assets include all of your current and fixed assets.

Liabilities:

• Current Liabilities: Current liabilities , such as accounts payable, short-term loans, income taxes, salaries and wages, and unearned revenue, are debts or obligations that are usually due within a year.
• Long-Term Liabilities: Long-term liabilities , such as loans, debt, and deferred income tax, are financial obligations you pay over time.
• Total Liabilities: Your total liabilities include all of your current and long-term liabilities.
• Owner’s Equity:  Owner’s equity is the value of your company once your liabilities are subtracted from your assets. This is also called net worth.

Additionally, balance sheet templates allow you to enter projected figures so that you can compare your current financial standing with your projected or target finances. For example, you can use a balance sheet to determine what your quarterly figures must be in order to beat your previous year’s profits. Balance sheet templates, such as this Investment Property Balance Sheet , allow you to factor in details such as property costs, expenses, rental and taxable income, selling costs, and capital gains.

Gain Insight into Your Company’s Financial Position with Balance Sheets in Smartsheet

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When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

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How to Create a Balance Sheet for a Startup

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Your startup’s financial position guides the decisions you have to make to scale and sustain your company. Balance sheets offer a realistic look at the financial wellness of your company and what it’s worth. 

This article on how to create a balance sheet for a startup shares what a balance sheet is, as well as a step-by-step guide to preparing one for your company. 

Balance Sheets for Startups

Making decisions for the future of your company is tough without a comprehensive overview of its financial position. Balance sheets offer a look into your startup’s assets, liabilities, and equity to provide you with the information you need to know to run a successful startup. 

What Is a Balance Sheet?

A balance sheet is a summary of your startup’s assets, liabilities, and equity to convey your company’s financial position. 

Companies are required to create three financial reports quarterly and annually: the balance sheet, profit and loss (P&L) statement, and a cash flow statement . The balanced sheet, alongside a profit and loss (P&L) statement and cash flow statement, offers a holistic view of the company’s financial wellness and sustainability. 

Why Do I Need a Balance Sheet for My Startup?

The primary reasons for completing a balance sheet for a startup are tracking performance, conveying information to investors, and using it as a decision-making tool. 

Tracks Performance

Knowing where your business is financially is one of the most important aspects of running a successful company. Balance sheets provide a comprehensive overview of your startup’s financial position, allowing you to track its performance.

Helps to Make Educated Decisions 

Your balance sheet serves as a method to determine your startup’s financial position. Thus, it is integral to educated decision-making for your company. 

Conveys Information to Investors

Whether they are current or prospective investors, a balance sheet alongside P&L and cash flow statements provides a valuable look inside your company that is critical for investors. 

What to Include in a Startup Balance Sheet

When you’re ready to create a startup balance sheet, you will need to include assets, liabilities, and equity held by shareholders. 

These can be broken down into current and long-term assets: 

• Current assets are able to be converted into cash within one year. This may include cash, cash equivalents, marketable securities, inventory, prepaid expenses, accounts receivable, and other short-term investments. 
• Long-term assets , or non-liquid assets/non-current assets, are assets that can be used for more than one year, minus depreciation. This may include fixed assets such as property, intangible assets such as patents or copyrights, bonds and real estate, and other long-term investments. 

Liabilities

Similar to assets, liabilities are split into current and long-term liabilities: 

• Current liabilities are money owed on immediate expenses such as taxes, rent and utilities, accounts payable, and debt repayment on loans or credit. 
• Long-term liabilities , however, only include bonds payable and long-term debt agreements.

Finally, you need to include the equity held by your company’s shareholders. This will be denoted by the amount of capital shareholders have put into the company as well as the profits left over after dividends are paid to your shareholders — otherwise known as retained earnings. 

Types of Balance Sheets

There are five types of balance sheet formats you can choose from. Each has a different focus; however, they all require the same inclusions: assets, liabilities, and equity. 

• Classified Balance Sheets separate assets, liabilities, and equity into three categories. This is the most common type of balance sheet used. 
• Unclassified Balance Sheets do not put assets, liabilities, and equity into categories, they are consolidated into one list. 
• Common Size Balance Sheet is similar to a classified balance sheet in that it categorizes assets, liabilities, and equity in the same way. The key difference is that each asset includes a percentage total of the total assets value while liabilities listed include a percentage of the total value of both liabilities and equity. 
• Comparative Balance Sheets compare lists of assets, liabilities, and equity against different time periods. 
• Vertical Balance Sheets are simply a list of assets, liabilities, and equity in that order, organized by decreasing liquidity. 

How to Create a Startup Balance sheet

Once you’ve determined the type of format you’ll be using, you can start compiling data and creating your balance sheet. 

When you’re ready to create your startup balance sheet, we recommend obtaining the help of an accountant to ensure you’re getting the most accurate representation of your startup’s cash position. 

1. Pick a Date

Most companies complete a balance sheet at the end of the fiscal year, commonly a few weeks after it has ended. However, you can also choose to create one quarterly or even monthly. 

Once you’ve determined the date, you can gather all relevant information to create your startup balance sheet. 

2. List and Add Up Assets

Add up all current assets that will convert to cash within the year, as well as long-term or non-liquid assets that will not convert to cash within the year. Total both types of assets in their own sections. 

Calculate the total of both assets as well and place it below the two asset sections. 

3. List and Add Up Liabilities

Identify all current liabilities or repayment obligations within the year. This may include salaries and accounts payable or short-term debts. 

Next, add all long-term liabilities not due within the year. This may include mortgages or loans. Then, calculate the total of all liabilities and place it below. 

4. Calculate Equity

The next step is to list equity by retained earnings and owner’s equity . Under this, you will include a total of all equity. 

5. Compare Numbers

Finally, combine the balances of your liabilities and equity. This should result in the same amount as your assets. If not, you will need to redo your initial calculations. 

Balance Sheet Tools for Startups

While it is possible to create a balance sheet for your startup on your own or with the help of an accountant, there are also tools available that make preparing your balance sheet simple. 

1. QuickBooks

QuickBooks offers balance sheet preparation tools included in their packages, ranging from $15–$100 per month. However, they also offer a free balance sheet template that is compatible with Excel. 

2. FreshBooks

If you’re looking for a free balance sheet template that easily integrates with other platforms, look no further. FreshBooks offers a free, customizable balance sheet template that is compatible with Microsoft Word, Google Docs, and Excel. 

Puzzle is a startup accounting software with a suite of features for managing your business’s financials, generating tax reports, and preparing documents such as balance sheets – all on a single platform. 

Further Reading

• Best Financial Tools to Track Startup Growth July 2, 2024
• Guide to Financial Modeling for Startups July 25, 2024
• Startup Costs Entrepreneurs Should Know July 25, 2024

Topics to Explore

• Startup Ideas
• Startup Basics
• Startup Leadership
• Startup Marketing
• Startup Funding

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Run » finance, how to create a balance sheet to ensure your business's financial stability.

A balance sheet provides a snapshot of your finances, and is one of the most important documents for your business. Here are some tips on how to create your company’s balance sheet.

Managing your business’s finances is no simple feat. Thankfully, there are tools that can help you organize all of your financial information in one place so you can revisit and analyze it as often as you need.

One of these tools is a balance sheet. A key financial statement that highlights your business’s financial standing, keeping an accurate balance sheet is crucial for keeping track of earnings and expenses, and ensuring financial health through close and consistent monitoring.

If you are interested in creating a balance sheet, this guide will define each element of the document so you know exactly what to include and how to include it.

What is a balance sheet?

Think of a balance sheet as “snapshot” of a company’s financial position at any given time. This snapshot includes what the company owns (assets) and owes (liabilities), as well as its capital. It outlines each component by breaking them down into categories, like current and fixed values, or short-term and long-term payments, to calculate the totals.

Comparing the two sections (assets versus liabilities) helps you understand your capital, or how much your business is currently worth. Continually reviewing this information is crucial to maintaining success.

Why you need a balance sheet

Financial stability is a priority for any business owner. Your balance sheet ultimately tells you how your business is performing and where you might need to make changes.

Your business sheet is also necessary when applying for credit or loans. You’ll likely have to provide the document to lenders so they can decide whether you qualify. Additionally, depending on the nature of your business, other individuals involved in your business, like investors, suppliers and even customers, might seek access to the information.

[For more on tracking your business's finances, see: The Key Statements of Financial Reporting .]

Your balance sheet ultimately tells you how your business is performing and where you might need to make changes.

Components of a balance sheet

As stated above, balance sheets consist of two sides (assets and liabilities) that help you define your equity. Here’s how to break down these three components:

Assets include a total of what your business owns. There are three parts to this section:

• Current assets: cash or its equivalent, including accounts receivable, inventory, prepaid expenses, securities (investments planned to sell) and notes receivable (amount of goods and services not paid regularly).
• Fixed assets: long-term investments, like equipment and buildings, that decrease in value over time, requiring depreciation for wear and tear.
• Other assets: neither fixed nor current, including intangible assets like goodwill, patents, copyrights and trademarks.

Liabilities

Liabilities include a total of what your business owes and can be broken into two parts:

• Current liabilities: amounts to be paid within a year, such as accounts payable, taxes, short-term loans, and lines of credit.
• Long-term liabilities: amounts due for longer than a year, such as long-term loans, mortgages, and employee benefits.

Essentially, your business’s equity is its net worth, or how much your company is worth should all its assets were sold and liabilities paid. This total is reached by subtracting what you owe from what you own (assets minus liabilities).

There are many resources, like free templates and samples, that can help you create a balance sheet. Your main concern should be keeping your document up to date, revisiting at least once annually, so you can stay on top of your finances. While it might seem complicated from a broad perspective, once you tackle each component, you’ll realize it is as simple as it is necessary.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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What is a Balance Sheet and why is it important in your Business Plan?

• EntrepreneursGateway.com Team
• November 3, 2018

If you are starting a business or thinking about writing a business plan , you might have heard the term ‘balance sheet’ .

This section will help you understand the basics of the balance sheet and why it’s so important to include it within your business plan.

This article is part of the Business Planning Hub , where you’ll find lots of guides and resources to help you create the perfect business plan!

Table of Contents

Once you understand the basic idea of a balance sheet, it’s pretty easy.

Basically, it shows your company’s:

Liabilities

• Owners’ equity (at a particular time)

A company’s balance sheet shows what that company owns (which is defined as ‘assets’) and what the company owes (also known as ‘liabilities’), as well as how much both the owner and shareholders have invested (which is known as ‘equity’).

And just like it sounds…

A balance sheet will always need to balance!

Assets are shown on one side and both the liabilities and equity are shown on the other side.

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If you think about it logically…

A business needs to pay for all it owns (its assets).

It can do this by either borrowing money (liabilities) or by having the business owners or investor put money into the business (equity).

A balance sheet also gives you an indication of what the company’s net worth is.

To determine what your company’s net worth is, you subtract your liabilities from your assets.

But let’s look deeper into what information should be included in a balance sheet…

And while you’re at it….why not download our FREE Balance Sheet Template?

Below, we will cover:

• The different components of a balance sheet
• Why it’s important to include a balance sheet when you create your business plan
• Examples of a Balance Sheet

#1 Breakdown of a Balance Sheet:

Assets and liabilities differ from business to business – because each one is different. Although titles and item lines may change, the equation won’t .

The assets of a business are reflected by the liabilities plus equity . 

For the purpose of the balance sheet, this means money that is currently available to hand .

In business planning, however, the term ‘cash’ refers to the bank or checking account of the business, also known as ‘Cash and Cash Equivalents’ (CCE). What a cash equivalent is, is basially an asset that is easily converted from liquid to cash.

Accounts Receivable:

This refers to the amount of money that is owing but hasn’t been paid (the ‘receivables’). Typically, this is sales on credit, usually from businesses to business sales.  

Included in this is the value of all-ready materials and finished goods that the business has to hand but isn’t using.

Current Assets:

Inventory, cash, and accounts receivable are all deemed current assets, and often these amounts accumulated are referred to on balance sheets as “Total Current Assets”.

Long-term Assets:

These are also known as “fixed assets” and included are items that have a long-standing value, like equipment or land.

Accumulated Depreciation:

This is where the value of the asset depreciates over time.

An example of this could be a company vehicle; with time, the car becomes less valuable.

Total Long-Term Assets:

On a balance sheet, this usually refers to depreciation or to describe long-term assets.

Accounts Payable:

This is the flip side to ‘accounts receivable’ – in other words, money that the business owes. The accounts payable figure is made up of the regular bills that the business is expected to pay. 

Sales Taxes Payable:

This is only applicable to businesses that don’t immediately pay sales tax. An example could be a business that pays it on a quarterly basis.

Short-Term Debt:

This is usually short-term loans or any debt that needs to be repaid within a year. This is also referred to as current liabilities or short-term loans on balance sheets. 

Total Current Liabilities:

The current liabilities are the above numbers which are added together and which the business must settle within one year.

Long-Term Debt:

These are the financial responsibilities that take over a year to repay. Usually, this is a larger number and won’t include interest. An example could be a long-term loan.

Total Liabilities:

This includes everything outlined above that needs to be paid out or repaid.  

This is money that is paid back into the company as equity investments via the owners.

Retained Earnings:

This covers earnings or losses that have not been paid out as dividends to the owners, and that have been re-invested into the company. If the retained earnings are negative, then this means that the company has accumulated losses.

Net Earnings:

This number is really important. The bigger it is, the more profitable the company is. It is sometimes also referred to as net profit or income. 

Total Owner’s Equity:

This is also referred to as capital as means business ownership. Equity itself can be calculated as being the difference between liabilities and assets. 

Total Liabilities and Equity:

This is what was outlined at the beginning of this article:

assets = liabilities + equity

#2 How to use a Balance Sheet

The importance of a balance sheet in your business plan.

It is vital to include a balance sheet within any business plan, as it is a really important part of the financials. 

The three indispensable aspects of business financials are the cash flow statement , the income statement , and the balance sheet. 

These enable anyone looking at the numbers to get a solid overview of how the business is functioning financially.

The balance sheet will also illustrate how much assets are worth and whether the company is in debt – all being information which is critical in creating a business plan and managing a business. 

One of the key powers your balance sheet has is to flag up if you have any cash flow issues.

There are two ratios that can be calculated from the balance sheet which are easy to understand. These ratios will show whether or not your business will have enough cash flow for meeting any current financial obligations. These are:

Current Ratio

Quick ratio.

Current ratio is also known as a liquidity ratio . What this means is whether or not your business has enough current assets (liquid) available to pay for expenses such as bills and operational costs. It’s used to measure your short-term health of the business.

We express this as being the number of times the current assets exceed the current liabilities.

Stick with me…

So, the higher the current ratio is, the better for the business!

The Formula:

Current ratio = current assets / current liabilities.

The best current ratio is considered to be between 1.2 to 2.

What does this mean?

Basically, if you have a business whose current ratio is below 1, you won’t have enough current assets to be able to cover its short-term liabilities.

If you have a current ratio that is equal to 1, this indicates that both current assets and current liabilities are equal, resulting in the business just being able to cover any obligations, short-term.

The Importance of the Current Ratio

The current ratio gives an overview of the short-term health of your business and will give you an early warning as to whether the businesses is working efficiently or not.

You can also attract more favourable credit terms if you were to require financing, as investors will be able to see how you are going to run the business whilst also keeping afloat with any current obligations.

This ratio is also referred to as the ‘acid test’ ratio. It excludes any inventory.

This is used to determine your businesses ability to meet short-term obligations with liquid assets that are easily and quickly converted to cash, which are normally 90 days (or in the short-term).

Current Assets – Inventory / Current Liabilities

A quick ratio of 1.5 to 1 is the average.

The Importance of the Quick Ratio

The quick ratio shows a conservative overview of your businesses financial standing. It determines whether or not your business has the resources to be able to meet its operating expenses, accounts payable, and other obligations short-term.

Knowing your industry’s standards is an important part of evaluating your business’s balance sheet effectively.

#3 Balance Sheet Examples:

Example of a Balance Sheet Forecast

Review & update your balance sheet

It is recommended that you update your balance sheet every quarter, as it’s a useful tool, if used properly.

Why not have a go at creating your own balance sheet?….why not download our FREE Balance Sheet Template?

Additional Resources:

To help you even further in creating your business plan, why not check out the following articles to help you in writing the perfect plan to impress:

• 5 Financial Plan Must Haves and How to Write one
• How to Do a Sales Forecast
• How to Build a Profit and Loss Statement (Income Statement)
• How to Forecast Cash Flow
• The Difference Between Cash and Profits
• Balance Sheet Template [Free Download]
• Cash Flow Template [Free Download]
• Profit and Loss Template [Free Download]

Now, over to you...

Now I’d love to hear from you:

Are you still unsure of which business plan you need?

Maybe you have written a business plan and would like us to review it?

Leave any comments below and I will be sure to answer as soon as they come in!

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A business owner’s guide to balance sheets

Preparing balance sheets can help attract investors by painting a clear picture of your small business financials.

The best way for investors to know how you’re going to treat their money is to look at how you treat your money. Just as a traditional mortgage lender looks at a credit report to evaluate a potential borrower, an investor often makes decisions based on a business’s financial statements. This includes your balance sheet, which represents your assets, liabilities, and net worth in an easy-to-digest format.

The structure of a balance sheet is built around a basic financial accounting equation:

assets – liabilities = owner’s equity

Here’s a breakdown of those terms as well as valuable tips, resources, and examples to help you create a snapshot of your business financials.

Assets include the value of everything owned by and owed to the business. On a balance sheet, assets are usually split into current and non-current assets.

Current assets are cash and those items that are likely to become cash in one year or less, such as inventory, accounts receivable (amounts due in the short term), and notes receivable (amounts due within 12 months).

Fixed assets , such as real estate and equipment, are categorized as non-current because they are less likely to sell in a year or less.

For purposes of the balance sheet, assets will equal the sum of your current and non-current assets — less the depreciation (or decrease in value over time) of those assets.

Liabilities

On the other side of the equation are your liabilities, both short- and long-term. These are the monetary obligations you owe to banks, creditors, and vendors.

Short-term liabilities include accounts payable, such as monthly invoices owed to vendors and creditors, and notes payable owed to others within the next 12 months.

Long-term liabilities , or those due more than a year away, include a mortgage balance payable beyond the current year.

Owner’s equity

The last component of the balance sheet is owner’s equity, sometimes referred to as net worth. This is your net investment in the company. It’s equal to total assets minus total liabilities. The financial statement should balance, showing assets equaling liabilities plus owner’s equity. This is one reason it’s called a balance sheet.

Making balance sheets work for you

Balance sheets focus primarily on tangible assets. These are the ones you can see and measure, such as inventory, machinery, vehicles, and land. Companies usually have some mix of tangible and intangible assets.

While all balance sheets follow the same equation, the types of accounts listed will vary based on the type of business. Product-based companies, such as retailers, sell goods to consumers and have overhead expenses like inventory and real estate. Service-based companies, like dry cleaners or law firms, sell services instead of goods, so they do not typically have inventory or raw products on the balance sheet. The method and time period in which payment is accepted may also change what’s listed in the balance sheet.

Balance sheets are usually drafted at the end of accounting periods: monthly, quarterly, or yearly. It’s a good idea to look at these documents alongside others such as income statements (which show long-term profits minus losses) and cash-flow statements (which show how quickly revenue is collected). A financial advisor can help you create and analyze these financial statements for a clear picture of your cash flow.

Helpful resources

Balance sheets can be created with ease, even if you’re not an accounting professional. Beyond balance sheets, you can improve your chances when applying for credit by taking key steps to prepare and learning how to develop a good credit application . The U.S. Small Business Administration (SBA) offers free online learning courses on running a successful business as well as live webinars, which may include courses on accounting.

Bookkeepers and Certified Public Accountants (CPAs) can also be invaluable. Consider enlisting a bookkeeper for day-to-day accounting and a CPA to prepare and analyze statements to help plan your financial future. With an accountant, financial advisor, and banker, you can form a helpful team to assist you.

Wells Fargo is here to help you get your balance sheets right and present your business in the best way possible. Explore our products and services and make an appointment today.

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Set up a balance sheet

A balance sheet shows your business assets (what you own) and liabilities (what you owe) on a particular date. Use our template to set up a balance sheet and understand your business's financial health.

On this page

Why you need a balance sheet

Create your balance sheet, complete your balance sheet.

The balance sheet provides a picture of the financial health of a business at a given moment in time. It lists all of your business's assets and liabilities. You can then find out what your net assets are at that time.

A balance sheet can also help you work out your:

• working capital – money needed to fund day-to-day operations
• business liquidity – how quickly you could pay your current debts.

Download our template to create your balance sheet.

Balance sheet template

For each year, you need to fill in actual or estimated figures against each of the below items. If you use estimated costs, make sure to label them clearly.

You also need to clearly state on your balance sheet whether your figures are GST inclusive or exclusive.

Current assets

Current assets are assets that you can convert into cash within one year or less. This includes:

• pre-paid expenses.

Fixed assets

Fixed assets are long-term assets that a company owns and uses in its operations. This includes:

• property and land
• equipment and tools
• furniture and renovations.

Total assets

Calculate total assets by adding all current and fixed assets.

Current liabilities

Current liabilities (or short-term liabilities) are liabilities that are due and payable within one year. This includes:

• credit cards payable
• accounts payable
• interest payable
• accrued wages
• income tax.

Long-term liabilities

Long term liabilities are liabilities that are due after a year or more. This includes loans.

Total liabilities

Calculate total liabilities by adding all current and long-term liabilities.

Calculate net assets by subtracting total liabilities from total assets.

Check our information on how to organise your finances.

Find financial terms in our glossary., was this page helpful, thanks for sharing your feedback with us..

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Step-by-step: How to make a balance sheet

Explore how a well-organized balance sheet can help your business avoid accounting errors, uncover new cash flow opportunities and achieve greater financial success. Presented by Chase for Business .

Businesses use balance sheets to make important financial decisions. One way to gain a better understanding of your business’s finances, is to organize them in a way that lets you quickly scan all of your business assets, liabilities and equity.

Why are balance sheets important?

Balance sheets help accountants, investors, creditors and business owners determine the overall financial health of a business. These reports provide a quick snapshot of a business’s finances — typically at quarter-end or year-end. Balance sheets are often used as a guide before making financial decisions for the future.

How to make a balance sheet

While it may seem intimidating at first, creating a balance sheet is actually a simple task once you understand what you need to do. You can create it using software programs like Excel or by investing in accounting software. Whether you’re a business owner or an accountant, you can follow these steps to make a basic balance sheet:

1. Invest in accounting software

If you want a program that has built-in functionality to help you enter data and make calculations more efficiently, consider investing in an accounting software program. There are a wide range of software programs that cater to users from beginner to advanced, so you can choose one that works for your current skill level. If you don’t already have a basic understanding of accounting, you may want to invest in an advanced software program that does most of the work for you.

2. Create a heading

The first step is to create a header for your document. The typical naming convention includes the words “Balance Sheet” with your company name and the date for the end of the fiscal year or quarter underneath.

Clearly marking this information makes it easier for you and any stakeholders to find the balance sheet when you need it and compare it to other financial documents or to balance sheets from other years or quarters.

3. Use the basic accounting equation to separate each section

Assets = Liabilities + Owner’s Equity. This is the basic equation that determines whether your balance sheet is actually ”balanced” after you record all of your assets, liabilities and equity. If the sum of the figures on both sides of the equal sign are the same, your sheet is balanced.

There are generally five parts to a basic balance sheet: individual assets, total assets, liabilities, owner’s equity, total of liabilities and owner’s liability. As long as you have all five of these in your balance sheet, you can order them in the way that makes the most sense to you. But remember, it’s important to structure your balance sheet so you don't leave out any relevant information.

Here’s one common example of how to structure your balance sheet:

•  Assets section in the top left corner
•  Liabilities section in the top right corner
•  Owner's equity section below liabilities
•  Total assets category at the bottom of the balance sheet
•  Combined total liabilities and owner's equity category under total assets

4. Include all of your assets

You can first list your current assets (cash, marketable securities or inventory), ordering the ones your company can quickly turn into cash before the others.

Then, under a separate subheading, you can list your non-current assets (property, equipment and nonmarket securities and investments) and intellectual properties. Include your intellectual assets like trademarks, patents or copyrights under your noncurrent category, or you can label them under "intangible assets."

Once you list all your assets and their value, you can calculate your total assets by adding your current assets, noncurrent assets and intellectual properties. For noncurrent assets in particular, you should be prepared to explain how you determined their fair value.

Lastly, you can compare your total to the one listed on your company’s general ledger to ensure there are no discrepancies. If there are, double check your figures.

Total Assets = Current Assets + Noncurrent Assets + Intellectual Property.

5. Create a section for liabilities

Your liabilities section lists all of your current and noncurrent liabilities. Once you list and assign the values for each, you can add them together to get your total liabilities. Example liabilities include short and long-term debt and accounts payable.

Total Liabilities = Current Liabilities + Noncurrent Liabilities

6. Create a section for owner’s equity

Your owner’s equity section includes your retained earnings-the assets you have left after liabilities and paying distributions to your shareholders or owners. Add the sum of each to get the total amount of owner's equity, or use the following equation:

Owner’s Equity = Total Assets − Total Liabilities

7. Add total liabilities to total owner’s equity

Once you have your total owner’s equity, you can add it to your total liabilities. Your total liabilities (including debt or accounts payable) and your total equity (remaining value) should equal your total assets.

If they do not equal, this means you need to check your calculations.

This is an example template to help you format your balance sheet:

By putting these steps into practice, it will help you avoid accounting errors, identify new cash flow opportunities and promote financial success within your company. Managing your business checking accounts can make creating a balance sheet much easier. Speak with a business banker to see what other options are available for you.

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Companies use balance sheets to track their assets, liabilities and owner's equity. Assets are what the company owns. Liabilities are the amounts the company owes. Owner's equity is the amount owners put into the business. It is important to remember that your balance sheet must balance. This means your assets equal liabilities plus owner's equity. These amounts can never be uneven. If they become uneven, then you have a problem with your journal entries after the business starts.

Write out every asset of the company and how much each asset is worth. For example, assume you have $500 of cash in the business, a car currently worth $5,000 and property worth $100,000. You would list each of these under "assets" on your balance sheet.

Write out any debt your company currently has in relation to the assets. In the example, assume you have $75,000 of debt with the company due in five years. You would write out long-term debt with $75,000. Remember, liabilities are broken into two categories: short-term and long-term debt. Short-term debt is anything due in less than a year. Long-term debt is anything due in more than a year.

Subtract your total liabilities from your assets to calculate your owner's equity. This is the amount an owner would put into the company. In the example, $105,500 minus $75,000 equals $30,500 of equity. So of all the assets, $30,500 was given to the company by the owner.

• Accounting Coach: Balance Sheet
• In formatting the balance sheet, you can have assets on the left side and the liabilities and owner's equity on the right side. You can also just list them out, but the order is always assets, liabilities and then owner's equity.

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

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How to Create a Personal Balance Sheet and Examples

To create a personal balance sheet, gather all your financial documents, list your assets and liabilities, then calculate your net worth.

If you’ve ever felt like your finances are a source of constant anxiety, you’re not alone. Money is a leading cause of stress for nearly half of U.S. adults, according to a 2024 Bankrate survey.

But what if part of that stress isn’t just about the amount of money you have, but rather, the uncertainty about where you stand financially?

Without a clear understanding of your financial situation, it can feel impossible to plan for the future or make informed decisions.

Whether you’re facing debt, unsure if your savings are enough, or just want to get a better handle on your overall financial health, a personal balance sheet can be a powerful tool to help you gain control and clarity.

It provides a snapshot of what you own and what you owe, offering a clear view of your financial position. In this article, we’ll guide you through creating your own personal balance sheet, helping you reduce the stress that comes with financial uncertainty.

What is a Personal Balance Sheet?

A personal balance sheet is essentially a snapshot of your financial situation at a specific point in time. It lists everything you own (your assets) and everything you owe (your liabilities). By subtracting your liabilities from your assets, you can calculate your net worth. These three elements—assets, liabilities, and net worth—form the core components of a personal balance sheet.

How to Create a Personal Balance Sheet for Beginners

To start making a personal balance sheet, choose which app is easiest for you to use. You can use Excel, Google Sheets, or the Numbers app. Once you’ve chosen the app you want to work with, follow these four simple steps, and you’ll have a clear picture of your finances in no time.

1. Gather your financial documents.

Before you start, you’ll need to gather all your financial documents. This includes:

• Bank statements: For checking, savings, and any other accounts where you keep money.
• Investment statements: For accounts like 401(k)s , IRAs, stocks, bonds, or mutual funds.
• Loan documents: Mortgage, car loans, student loans, and any other debts you owe.
• Credit card statements: To get a current picture of your outstanding credit card balances.
• Property appraisals: If you own a home or other valuable assets like a car, jewelry, or collectibles.

Having all this information in one place and up-to-date will make it easier to complete your balance sheet accurately. For a simpler way to organize your bills and Buy Now Pay Later payments, use Cushion . This handy app helps you manage your finances by giving you a clear, real-time view of your bills. Plus, you can easily sync everything with your Google Calendar , so you’re always on top of your payments.

2. List your assets.

Now that you have all your documents, start by listing your assets. Assets are everything you own that has value. Categorize them according to the following:

• Cash and cash equivalents: Write down the balance from each of your checking and savings accounts. For example, if you have $2,000 in your checking account and $5,000 in savings, list those amounts.
• Investments: Include the current value of your investments, such as your 401(k), IRA, or any stocks and bonds. For example, if your 401(k) is worth $14,933 and you have $5,000 in stocks, include these figures.
• Real estate: Make a reasonable estimate of your home’s value and add it to your list of assets. If your home is worth $250,000, include this figure in your list.
• Personal property: Estimate the value of big-ticket items like your car, jewelry, art, or any other valuable collectibles. If your car is estimated to be worth $10,000, ensure that this amount is included on your list.
• Other assets: Don’t forget about life insurance policies with a cash value or any business interests you might have. For example, if your life insurance policy has a cash value of $20,000 , it should be added to your list of assets.

Add up the total value of all your assets to get your Total Assets amount. Here’s what it may look like on an Excel sheet:

3. List your liabilities.

Next, it’s time to list your liabilities, which are the debts you owe. You can categorize them this way:

• Mortgages: If you have a mortgage, write down the outstanding balance. For example, if you still owe $180,000 on your home, list this as a liability.
• Car loans: Write down the amount you still owe on your car loan. For example, if you owe $8,000, include this.
• Credit card debt : Include any outstanding balances on your credit cards. If you owe $3,000, list it.
• Student loans: If you have student loans, list the total amount you owe. For example, if you have $25,000 in student loans, this should be noted.
• Other liabilities: Don’t forget about other debts like personal loans or unpaid medical bills. For example, if you have $2,000 in unpaid medical bills, include this.

Add up all your liabilities to get your Total Liabilities amount. Here’s what it may look like on an Excel sheet:

4. Calculate your net worth.

Once you’ve listed all your assets and liabilities, it’s time to calculate your net worth. Simply subtract the total liabilities from the total assets:

Following the examples above, if your total assets amount to $306,933 and your total liabilities are $218,000, your net worth would be $88,933. This figure gives you a snapshot of your financial health.

What does this number mean? If your net worth is positive, it means you own more than you owe. If it’s negative, it means you owe more than you own, which can be a sign that you need to work on paying down debt.

Below, you’ll find a table that shows the average net worth by age , so you can gauge your financial standing among your peers:

If your net worth is below average for your age, don’t worry—there are simple steps you can take to boost it. Start by saving more and paying down debt. You might also consider finding ways to increase your income, like picking up a side job or doing freelance work. Investing in growth assets like stocks, mutual funds, or real estate can also help. By making these small changes, you can steadily improve your financial situation and move closer to your goals.

To get you started, here’s a sample balance sheet for you to try, copy, and download:

Sample Personal Balance Sheet

Why Have a Personal Balance Sheet?

A personal balance sheet isn’t just a document—it’s a tool that can help you improve your financial health in several ways:

• Identify high-interest liabilities: One of the immediate advantages of a personal balance sheet is that it helps you identify which liabilities carry the highest interest rates. Focusing on paying down these debts first can help you save money on interest payments and improve your net worth over time.
• Adjust your budget and savings: A personal balance sheet allows you to see the bigger picture of your finances. If you find that your liabilities are too high compared to your assets, you might need to adjust your budget. This could mean cutting back on unnecessary expenses or increasing your savings rate to improve your financial standing.
• Track your financial progress: By regularly updating your balance sheet—ideally, once a year—you can track and evaluate your financial progress. Is your net worth growing? Are you reducing your liabilities? This practice helps you stay on top of your financial goals.
• Make informed decisions: Having a clear understanding of your assets and liabilities empowers you to make better financial decisions. Whether it’s deciding to take on new debt, invest in a new opportunity, or simply save more, your personal balance sheet serves as a valuable guide.
• Plan for major life events: Whether you’re saving for retirement , buying a home, or planning for your child’s education, a personal balance sheet provides a clear picture of where you stand financially. This makes it easier to plan for major life events, ensuring you have the necessary resources when the time comes.

This week, why don’t you set aside an hour to list your assets and liabilities in a simple spreadsheet. Creating a personal balance sheet is a crucial step toward taking control of your finances. It’s not just for the wealthy or financial experts—anyone can and should create one. By following the steps outlined in this guide, you’ll gain a clear picture of your financial situation, empowering you to make better decisions, plan for the future, and achieve your financial goals.

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