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Balance Sheet

The balance sheet reports a company's total assets, liabilities, and equity at a given point in time. It ensures that the accounting equation still holds true!

Assets = Liabilities + Equity

To create the balance sheet, we'll take the Trial Balance account balances...

TRIAL BALANCE

AccountDebitCredit
Cash$1,250
Equipment$1,500
Notes Payable$1,500
Common Stock$1,250
Totals$2,750$2,750

...and categorize the accounts by type (Asset, Liability, & Equity)!

BALANCE SHEET

AccountAmount

ASSETS
Cash$1,250
Equipment$1,500
Total Assets$2,750

LIABILITIES
Notes Payable$1,500
Total Liabilities$1,500

EQUITY
Common Stock$1,250
Total Equity$1,250

It's critical to assess whether the total assets equal the total liabilities + equity! If they do, then you're in good shape!

BALANCE SHEET

AccountAmount

ASSETS
Cash$1,250
Equipment$1,500
Total Assets$2,750

LIABILITIES
Notes Payable$1,500
Total Liabilities$1,500

EQUITY
Common Stock$1,250
Total Equity$1,250

When we plug these into the accounting equation...

Assets = Liabilities + Equity
$2,750 = $1,500 + $1,250

...we get the following result!

Assets = Liabilities + Equity
$2,750 = $1,500 + $1,250
$2,750 = $2,750

PRO TIP: Don't assume that...

  • Your total debits ($2,750) will always equal your assets ($2,750)
  • Your total credits ($2,750) will always equal your liabilities + equity ($2,750)!

Sometimes, this doesn't occur!