Balance Sheet – A Beginners Guide

A Balance Sheet is an accounting report required by all companies registered at Companies House and is useful for self-employed to see how their business is performing. It allows you to see a snapshot of your business on a given date, normally month or year-end. It is also a useful tool for management to see the value of assets a business owns including equipment, bank balance and what it owes at any given time. We have included a balance sheet example and details.

The report provides information that is useful when assessing the financial stability of a company. There are financial ratios that can be used to calculate the business’s financial position; these include liquidity ratios and gearing ratios. They are used by banks and suppliers to work out if the can offer a loan, overdraft or credit facility.

All accounting software packages will include the Balance Sheet in their reporting section. It is therefore easy to print out a balance sheet on any given date. If you are not using accounting software then Excel is a good tool to design your own.

It shows the following information:

Balance Sheet Heading

The heading includes the business name and date. The format of the date is: as at date. An example might show ABC Computers – Balance Sheet as at 30th June 2019.

AssetsFixed Assets, Current Assets, intangible assets, stock, cash, money owed from customers (accounts receivable ledger) and prepayments.

Liabilities – Debts, money owed to suppliers, taxation, pensions and accruals.

Equity – Shares and retained earnings from the Profit and Loss account.

Balance Sheet Template

We have a free Excel Template for you to download. It is not suitable for submitting to Companies House but will enable a small business to produce a report for their year-end. If you are a limited company, you will need to get your accountant to format the report as part of your accounts to submit to Companies House.

Formatting a Balance Sheet

The report is formatted vertically showing the following:

Assets – Liabilities = Equity

The two sides of the equation must always balance.

Below is a typical balance sheet example, each link provides further details and how to account for them.

Assets

Fixed Assets 1000
Accumulated Depreciation 100
Total Fixed Assets 900

Current Assets

Stock 250
Debtors 150
Bank 1250
Total Current Assets 1650
Total Assets 2550

Liabilities

Creditors 300
Loan 200
Credit card 75
Total Liabilities 575
Net Assets 1975

Equity

Capital 200
Retained Profit 1775
Total Equity 1975

Using the sample above we can look at some transactions that may change only the balance sheet figures.

The business purchases a new computer for 400.00 from the bank account. The transaction will increase the fixed assets by 400.00 and reduce the bank by 400.00

Another example is the business pays 125.00 to the creditors. The double entry will be to reduce the bank by 125.00 and reduce the creditors by 125.00.

The sample would then look like this:

Assets

Fixed Assets 1400
Accumulated Depreciation 100
Total Fixed Assets 1300

Current Assets

Stock 250
Debtors 150
Bank 725
Total Current Assets 1125
Total Assets 2425

Liabilites

Creditors 175
Loan 200
Credit card 75
Total Liabilities 450
Net Assets 1975

Equity

Capital 200
Retained Profit 1775
Total Equity 1975

Any business which runs accounting software will have the ability to create the report within the software. If you are running a manual system, then we have included a free Excel template.

Balance Sheet Example

balance sheet exampleThe Balance Sheet example shows the following information.

The company owns 18500 in Assets. The assets are made up of fixed and intangible assets, bank, stock and debtors The company is owed 5500 of liabilities; this includes 3000 from customers and 2500 in a loan. It is financed by share capital and retained profits from the profit and loss account.

If you want to see more Balance Sheet examples take a look on Companies House website. All Limited companies have to submit a Balance Sheet each year and available to view. Most small companies will submit abbreviated accounts. For larger companies, they may even have the report on their website.

Return from the balance sheet to Accounting Basics page.