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
Account | Debit | Credit |
---|---|---|
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
Account | Amount |
---|---|
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!
PRO TIP: Don't assume that...
Sometimes, this doesn't occur!