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Download balance sheet template in Microsoft Excel format.
The Correct Balance Sheet Format
If you’ve been charged with the responsibility of drafting your company’s balance sheet, there are several factors you will need to keep in mind, not the least of which is the balance sheet format. Unlike other types of financial statements—income statements, cash flow reports, etc.—the balance sheet must be constructed using a very specific format. The reason for this can be found right in the statement’s name, “balance sheet.” This document will have to show a balance between assets and the sum of the two different ways those assets are financed, equity and liabilities. To help paint a clearer picture of the balance sheet format, in this article we will discuss how the three main categories, assets, liabilities and equity, should appear on this statement, and show you the preferred order when listing the individual items within each category.
The Balance Sheet Explained
A balance sheet is a financial statement, usually constructed by an accountant, which provides a snapshot view of an organization’s financial standing at any given point in time. These statements can be created annually, quarterly, monthly or at any time during the year when this type of statement might be needed to show the organization’s monetary position to potential shareholders and investors.
As mentioned above, the three main categories on the balance sheet are assets, liabilities and equities. Assets represent any cash on hand, along with all items of worth that are owned by the organization and could be liquefied into cash, either in the short or long-term. Liabilities are the debts a company owes to a third-party, including bank loans, and equity is the shareholders’ stake in the assets after all liabilities have been paid and settled.
The Balance Sheet Format
The balance sheet format is very important, as its primary purpose is to provide a comprehensive picture of your company—a picture that would be easy for someone not associated with your company to quickly understand.
Once you’ve collected the necessary data, the proper balance sheet format should be a document separated into two columns, with assets listed on the left side, and liabilities and equity on the right. Also, remember to list liabilities above equity when filling in the right hand side.
When listing your company’s assets you should list all of your “current” assets first. These are assets that could easily be liquidated or converted into cash within the next calendar year. This section includes things like cash on hand, petty cash and accounts receivable. Long-term assets should be listed next. This category represents any assets of value that you do not expect to liquidate within the next 12 months, but rather will continue to use in your day-to-day operations. This might include items such as supplies, equipment, land and real estate.
When listing the liabilities, begin with those debts that will mature or come due the soonest. These are called current liabilities, and can include items such as accounts payable and other current debts. Long-term liabilities should be listed next and should include any debts or commitments with a maturity date more than 12 months away.
The last category to consider in this balance sheet format is equity. This category does not have a maturity date, and therefore it will not need to be expressed as “current” or “long-term,” however, you will need to list your total investment in terms of current stock and retained earnings.