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
| 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...
- 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!