An example of a balance sheet on excel

Create a Balance Sheet with Excel

This post illustrates how to create a financial statement such as a balance sheet with built-in Excel features and functions. Our primary objective is to build a workbook that efficiently pulls values from the trial balance into the balance sheet.

Overview

For the purpose of this post, let’s assume we have a data sheet that contains the source data for the report, we’ll call this data the trial balance. Next, we’ll assume that we need to get the data from the data sheet into the report sheet in an automated way. In order to efficiently retrieve the amounts, or account balances, into the report (balance sheet) we’ll use Excel’s built-in conditional summing function SUMIFS. If you’ve not explored this amazing function, I wrote a blog post that discusses the SUMIFS Function so feel free to check it out if you would like to review the function’s syntax.

Let’s take a look at the data sheet containing the data for the report, our simplified trial balance.

Excel Trial Balance with Account Balances

Now, let’s take a look at our desired balance sheet layout.

Excel Balance Sheet structure

One challenge that Excel users face when building a report such as a balance sheet is the fact that the report labels don’t match the data labels. For example, the account name in the trial balance is Checking, but the value needs to be reflected in the balance sheet as Cash. We need to provide Excel with these label translations so that we can use the SUMIFS function to retrieve the correct account balances for each report line.

In the screenshot below, I’ve updated the trial balance and mapped the account names to the financial statement labels.

Trial balance with account balances mapped to the financial statement lines

Also note that in some cases, many accounts are mapped to one report line, for example, AR and AR Allowance are both mapped to the Accounts Receivable balance sheet line.

Once we have defined the mapping, we can easily compute the financial statement values with the SUMIFS function. For example, we could use the following formula in cell C7 in our balance sheet:

• TB!D:D is the sum range, the account balance column on the TB trial balance worksheet
• TB!C:C is the criteria range, the report label column on the TB trial balance worksheet
• B7 is our report label

We can fill the formula throughout the report to complete the balance sheet. The completed report is shown below.

Excel Balance Sheet with amount formulas

And there you have it!

Note: for recurring-use workbooks, you can set up the mapping in a dedicated worksheet and then use lookup functions to retrieve the report labels into the trial balance, or conversely, use SUMIFS to retrieve the trial balance values into the map itself.

Additional Considerations

In addition to achieving the key objective, which was to automatically group and pull account balances into the balance sheet, here are a few finer points to consider when building recurring-use reporting workbooks.

• Build dynamic formula-based report headers
• Indent with the indent command, not with leading spaces or into a new column
• Use an error check sheet to ensure all data from the trial balance made it to the balance sheet
• Use a start here sheet to store global settings
• Use the SUBTOTAL function rather than SUM to compute the balance sheet totals
• Use skinny rows between the last data row and the formula row

Notes

• If you have not played with the SUBTOTAL function before, please enroll into the FREE Better Summing online course so you can learn the details of this marvelous function!
• The SUBTOTAL function and skinny rows were covered in Excel University Volume 1.
• Additional post concepts including mapping tables, dynamic headers, errorck, start here, and indentation, are derived from Excel University Volume 2. For more information or details, please feel free to pick up a copy of the book or enroll into the online course.

Conclusion

Feel free to download the file that was used to create the screenshots above, which includes the formulas, and remember, Excel rules!

Источник

Balance Sheet: Definition, Examples, Templates in Excel!

A Balance Sheet is one of the general-purpose financial statements (the other two are the Income Statement and Cash Flow Statement) that companies present to their shareholders. Small and middle-companies do it annually, and bigger ones do it quarterly. Although unincorporated businesses are not normally required to prepare balance sheets, it is often beneficial to do it. In this article, we will refer to both incorporated and unincorporated businesses as ‘companies’.

So, What is a Balance Sheet, and What are the benefits of preparing it?

A Balance Sheet is a ‘snapshot’ of the company’s financial situation at a certain point in time, normally at the end of the fiscal year. It answers three important questions:

• How much of value the company owns?
• How much it owes to its creditors?
• How much money would left for the company’s shareholders, if the company sells off all its assets, and pays off all its debts?

Things of value that the company owns are called Assets.

Although most assets are tangible, certain intangible items, such as, for example, money owed to the company by its customers, are considered assets, as long as it is probably that the company will be able to collect them from the debtors.

These are typical examples of assets:

• Cash: petty cash, money in bank accounts, short-term certificates of deposit;
• Accounts Receivable: money to be received from customers for goods sold or services provided by the company;
• Inventory: merchandise, goods manufactured for sale, materials;
• Prepaid Expenses, for example, rent paid upfront;
• Fixed Assets: property, machinery and equipment, trucks, cars and vans, and similar valuable long-term items.

Depending on the nature of their business, some companies may hold other classes of assets as well (marketable securities, financial investments, intangible assets, work in progress).

Money that the company owes to its creditors is called Liabilities.

Liabilities may arise from formal agreements, statutory requirements, or business customs and usual practices, as long as it is probably that the company will be required to spend money to settle the liability.

Typical examples of liabilities are:

• Accounts Payable: money owed to the company’s suppliers for goods and services purchased from them;
• Loans repayable, and interest payable on them;
• Wages and salaries payable;
• Taxes payable;
• Prepayments received from customers.

What is left of the company assets’ value after deducting liabilities is called Shareholder Equity. Sometimes it is referred to as Net Assets.

Although Shareholder Equity is a residual value, it is also broken down to several items. Typically, it encompasses the following:

• Share Capital: money paid in by the shareholders in exchange for equity shares. In the case of the sole entrepreneurship, it is money provided to the business by its owner;
• Retained earnings: earned net profit not yet distributed to shareholders;

Shareholder Equity may include other items as well, such as revaluation and other reserves, and additional paid-in capital.

As a business owner, how can you benefit from having a balance sheet prepared on a regular basis?

Firstly, it provides you with a quick snapshot of your business’s net assets, i.e. how much you own, and how much you can pay to yourself as dividends.

Secondly, it is easy to evaluate from balance sheet important financial metrics, such as Current Ratio and Debt (Debt-to-Equity) Ratio, indicating how healthy financially your business is.

Thirdly, by comparing balance sheets at different reporting dates you will be able to detect trends in your business and take timely action, if necessary.

How to create a Balance Sheet in Excel?

Normally, it is your accountant or bookkeeper who should prepare a balance sheet for you. However, if you are an owner of a small business, in most cases you will be able to do it yourself.

First, determine a reporting date. Except for rare special cases, financial statements must be prepared at the end of the last day of your fiscal year. You probably will be preparing the balance sheet in some time after the reporting date; however, you must present the items as they existed at the reporting date, not at the date when you are preparing the statement. For example, you must present there debts extinguished after the reporting date, if they were outstanding on that date.

Second, write down all your assets along with their values. If you maintained regular records, you can simply take respective figures from your books. Even if you did not, you still should be able to list your assets, and assign values to them. Value your inventory at the price you paid to buy them, or, if you are unable to trace back the purchase, at the price you would have paid to purchase such items. However, you should not value fixed assets, such as machinery, equipment and motor vehicles, at the purchasing price. Because these items gradually lose their value over time, due to wear and tear, and obsolescence, value them at the price you would be able to sell them for in present condition.

Sort all your assets into two categories. In the Current Assets category, include cash, accounts receivable, inventory, and other items that you expect to spend, sell or utilise within next twelve months; all other items include in the Non-Current Assets category.

Third, list all your obligations that existed at the reporting date. Although it may seem quite straightforward, there are traps that you ought to avoid. Do not forget to include in liabilities taxes which are payable in arrears. For example, sale tax or income tax resulting from your operation prior to the end of the reporting period are normally payable after the reporting date. Nevertheless, you must include them in liabilities at the date of the balance sheet. Similarly, wages that were paid shortly after the reporting date still must be presented in liabilities at that date.

Similarly to the assets, sort all your liabilities into two categories. Current Liabilities include those payable within next twelve months, whereas Non-Current Liabilities are those payable in more than one year after reporting date.

Next, calculate total value of all assets and liabilities. If you put them into Balance Sheet Excel template, it will be done automatically. A difference between total assets and total liabilities provides a value of Shareholder Equity.

Although you may stop at this point, it is advisable to break down Shareholder Equity into specific items. At very least, you should separate invested owner capital from retained earnings to see whether, and how much, the company’s capital increased over initial shareholder investment.

What to look in the Balance Sheet at?

As we have said, a Balance Sheet is a valuable source of information about the company’s financial situation.

First, look at the Shareholder Equity value. It must be positive, and ideally more that the value of shareholder investments (the sum of common shares and additional invested capital). If it is less, it may be due to accumulated losses, or over-distribution. In such a case, you should decide whether additional investment is necessary to cover the losses. In some cases, there may be legal obligation of shareholders to compensate the company for over-distribution.

However, if Shareholder Equity becomes negative, it means that the company cannot repay all its debts using existing assets, and will soon go bust, unless the shareholders put in additional money to keep the company afloat.

Next, look at the metric called the Current Ratio. Divide total value of current assets by the total value of current liabilities. This ratio should be more than 1, ideally 1.2 or more. It means that the company is liquid, i.e. well able to pay their short-term obligations out of existing current assets. If Current Ratio falls below 1, the company, though not outright insolvent, experiences difficulties in paying their current debts. However, too high ratio is not very good either. The Current Ratio exceeding 3 indicates that the company holds excessive assets that most probably are used inefficiently.

Next two metrics are the Debt Ratio and the Debt-To-Equity Ratio, both indicating degree of financial risk associated with using debt for financing the company’s operation. The Debt Ratio shows what share of the company’s assets is financed by debt; normally, it should be 0.7 or less, but this may vary for different industries. The Debt-To-Equity Ratio shows how heavily the company’s financial position is leveraged, i.e. how much of debt, as compared to equity, the company uses to finance its operation. The more its value, the more associated financial risk. Acceptable financial leverage for most industries varies from 60/40 (Debt-To-Equity Ratio 1.5) to 70/30 (Debt-To-Equity Ratio 2.33), and may be even 80/20 (Debt-To-Equity Ratio 4) for capital-intensive industries such as development.

What is the difference between the Income Statement and Balance Sheet?

Both are so-called general-purpose financial statements, i.e. standard financial statements intended primarily for a company’s shareholders. This is the only similarity though. While a Balance Sheet is a snapshot of the company’s financial position at a certain point in time called the reporting date, an Income Statement helps us to understand what happened to the company between successive reporting dates. It answers the following questions:

• How much of sales revenue and other income the company earned between two reporting dates (this is called the reporting period);
• How much of cost associated with sales of goods and services the company incurred during the reporting period;
• How much other expenses, such as general, administrative, and marketing expenses the company incurred;
• How much it cost for the company to pay for its debt (interest expense);
• What is the gross profit before tax, how much of income tax the company paid, what is its net profit that can be distributed to the shareholders, or used to expand its business.

Both the Balance Sheet and the Income Statement are widely used by financial analysts to assess how robust the company’s business is. If you only want to track some of your income and expenses, then you may use specifically prepared templates. For example we have Etsy Seller Spreadsheet for Etsy sellers to track their incomes and expenses, as well as a Rental Income & Expenses Excel Template for landlords. Someka also offers Rental Property Template in Google Sheets.

How do you prepare an Income Statement from a Balance Sheet?

You cannot. This is because of the different nature of both statements, as discussed above.

If, for example, you look at two pictures of the same person, ten years between them, you definitely will be able to tell certain changes. However, it is not probably that you will be able to say definitely what happened to that person during that time.

The same with financial statements. Suppose, accounts receivable, as shown in the balance sheet at the previous reporting date, were $1000, and now they are $500. Can we learn anything from these figures? No, because there could be a number of scenarios leading to the same outcome. These are just a few of them:

• The company sold nothing, but collected $500 from its customers;
• The company sold nothing, and wrote down $500 of uncollectable receivables;
• The company sold goods worth $500, and collected $1000 from its customers;
• Turn on your imagination to produce more.

Where profit and loss show in the Balance Sheet?

A Balance Sheet shows accumulated annual profits and losses in a single position called the Retained Earnings, which is part of Shareholder Equity.

Each time a company gets profit, it increases the balance of retaining earnings in the Balance Sheet by the amount of net profit, less distribution to shareholders.

Each time a company incurs loss, it decreases the balance of retaining earnings in the Balance Sheet by the amount of the loss.

How do you record loss in the Balance Sheet?

It is simple. Loss is presented as a negative amount in place of profit. However, if you previously recorded positive retained earnings, it will become negative only after losses completely offset accumulated profit. Diminishing balance of retained earnings in the Balance Sheet may indicate that the company incurs a loss; however, it may be due to the distribution of previous years’ profit as well.

Is the Balance Sheet prepared first?

Nowadays, most businesses, even the smallest, use accounting computer software to keep their records. If all transactions are registered correctly and timely, a full set of financial statements can be produced by the software instantly.

In the past, however, many small businesses, especially those relying heavily on cash transactions (small groceries, pubs, etc.), only kept records of cash receipts and payments. Probably, some of them still do. To properly calculate their net earnings, they needed to adjust cash receipts and payments by the change of inventory balances during the reporting period. Thus, they made a count of their inventories at each reporting date, and then those numbers went into the calculation of profit. Therefore, yes, they needed to prepare a balance sheet first.

Does Excel have a Balance Sheet template?

Yes, there are a lot of them.

Microsoft alone developed few, and other developers too.

Why then you may want to use Someka’s Balance Sheet Excel template?

There are a number of reasons:

• It is user-friendly;
• It features perfect graphic visualization and allows a user to instantly calculate important financial ratios;
• It is a commercial-grade template developed accordingly to high standards, yet free.

Источник

A balance sheet is commonly called a “snapshot of a company’s financial condition”. It is a statement of the company regarding its financial position or its net worth or in simpler words a statement regarding the company’s spending and earning. There are three important financial statements in a company namely income statement, cash flow statement, and balance sheet. It is expected to carry details regarding the company’s assets, liabilities, and owner/shareholder’s equity; but there might be additions to this, depending upon the need and want of the business. A standard company balance sheet generally has two main heads:

1.      Assets (what the company own)

2.      Liabilities (what the company owe)

Assets = Liabilities + Equity

The above two heads must be an equal ratio for a balance sheet to be ideal otherwise it depicts that the company’s financial position is unstable which might even lead the company into bankruptcy. The ‘equity’ which we see above in the equation, is the amount or the money which the company owes to its shareholders. The difference between the assets and the liabilities is known as ‘equity’ or ‘net worth’ or ‘capital’ of a company.  According to the accounting equation, net worth must equal assets minus liabilities.

Balance Sheets are usually calculated after every quarter, six months, one year, or one for each business transaction. A balance sheet sometimes may also carry details from the last year along with the current year, which makes the comparison between two consecutive years easier, it is called a comparative balance sheet.

Let’s dwell a little upon what are the three main things that form the equation of a balance sheet:

1.  Asset – These are the things or resources which the company owns. There are two kinds of assets the first one is ‘current asset’ and the other one is ‘non-current asset’.

• Current Assets: – These are also known as liquid assets with a lifespan of one year or less. They can be liquidated and turned into cash easily. Current assets include cash, accounts receivable (the amount owed to your company by customers), inventory (company’s work in progress), and prepaid expenses.
• Non-current Assets: – These are non-liquid assets with a longer lifespan than a year. They cannot be liquidated easily and converted into cash. These are the company’s long-term investments such as property, equipment, vehicles, etc. Non-current assets might also include intangible assets such as patents, contract, copyright, and goodwill

1.  Liabilities– These are the obligations or the duties the company owes to the outside parties (e.g. customers and creditors). They are also divided into two categories, one is ‘current liability’ and the second one is ‘non-current liabilities’ or ‘long-term liability’.

• Current Liabilities: – these are the obligations that the company has to discharge within a term of one year. They might include the debts which are due within one year, such as account payable, short-term loans, current portion of long-term loans, taxes payable, wages, rents (of building and equipment), utilities, etc.
•  Long-term Liabilities: – these are the obligations or the long-term debts of the company which is to be discharged after a term of one year. Long-term liabilities may include deferred income tax (tax due on the increase in value of an investment), bank debts, principal on bonds, and any pension fund liabilities.

2.  Equity- when liabilities are deducted from the total assets, equity is all that is left. When the company is a sole proprietor “owner’s equity” is used in the balance sheet and when the company is a corporation “shareholder’s equity” is used. It is also called the book value of the company. Equity includes capital stock (the amount invested by the owner or the inverters/shareholders) and the retained earnings (money used to pay the debts or reinvest in the business for the growth and expansion purpose). We can say that equity is a residual of the company after subtracting the liabilities from its assets.

Balance Sheet an Essential for Business Today

New investors and creditors before investing in a business sure would like to know about the profit and loss ratio of the company. No one would willingly invest in a business that is performing poorly or which might soon end up bankrupt. The point being made is that a prudent man would analyze a company/business’s financial position before investing in it and this is where the balance sheet comes handy. Financial stability and business performance are assessed through balance sheets by the investors and to infer as to how efficiently the company can use its resources and assess the value of their investments.

Just as much as the balance sheet is important to the outside investors, it is equally essential for the smooth running of the business. It helps the business to keep a track of their finances so that they know the areas which need attention, to know the best ways to meet their financial obligations, and to decide whether the business needs additional debts/loans or not. Balance sheets are also required because it is only through these documents that the bank ascertains if you are qualified for the loan or not. 

Balance sheets can be used to track the company’s growth or downfall, whichever is the case. By comparing balance sheets of different years one can understand the growth or fall of the entity. It helps the company to meet the unforeseen expenses. Preparing balance sheets is optional for sole proprietorships and partnerships, which is not the case with companies. Nevertheless, a balance sheet is useful for monitoring the health of the business.

Balance Sheet for Excel Format

There are different types of balance sheet formats today. Common formats are the vertical balance sheet and horizontal balance sheet, but there are other formats as well, such as classified, common size, or comparative balance sheets. It is up to the companies or the individuals to select the format which best suits their taste or which they find easier to read and manage.

1.      Horizontal balance sheet: in these two tables are formed. The assets appear on the left-hand side and liability plus equity appears on the right-hand side.

2.      Vertical balance sheet: in this format, again there are two tables but they are one underneath another. The assets are listed in the first list and under the list of assets there is liabilities plus equity list.

The advantage of creating a balance sheet in excel is that it provides formulas and readymade tables which not only saves labour but reduces the risk of calculation mistakes as well. In an Excel spreadsheet, there are endless rows and columns which can be selected as per the users need (depending upon the choice of format). And each row or column contains cells, here we can enter our data along with the formula and in seconds we will get the desired result we need.

Excel Spreadsheet provides its users with a template balance sheet that can be used in small businesses for accounting purposes. There are endless rows and columns in an excel spreadsheet. The first thing you have to do is decide whether you want to formulate a vertical balance sheet or a horizontal balance sheet or a comparative balance sheet or any other. Once decided then the next step is to select columns and label them accordingly. There are generally two lists (assets and liabilities) in a balance sheet that contain two columns each, irrespective of the format. The asset’s list will carry the names of the assets of the company in the first column and side by side the figures or the value of those assets in the second column. The list of liabilities is also prepared similarly. One can also insert additional columns and rows in the balance sheet if they wish to.

	Assets		Liabilities
	Current Assets		Current Liabilities
1.	Cash	5000	1.	Bank drafts	500
2.	Inventory	3000	2.	Accounts payable	1000
3.	Accounts receivable	2000
	Total Current Assets	=10000		Total Current Liabilities	=1500
	Fixed Assets			Long-term Liabilities
1.	Land and buildings	13000	1.	Mortgage	9000
2.	Equipment	6000	2.	Long-term loans	2000
	Total Fixed Assets	=19000		Total Long-term Liabilities	=11000
				Total Liabilities	=12500
				Capital
			1.	Shares	10000
			2.	Retained earnings	6500
				Total Capital	=16500
	TOTAL ASSETS	=29000		TOTAL LIABILITIES AND CAPITAL	=29000

“Horizontal Balance Sheet Format”

To create an excel balance sheet, one has to be acquainted with the basic functions or formulas involved in its creation. There are generally three formulas involved which go into the making of an excel balance sheet viz, ‘Excel Addition Formula’, ‘Excel Subtraction Formula’, and ‘Sum Function’. We can better understand these with the help of illustrations.

For instance, we want to enter the total value of the company’s land property in one cell and there are three properties, for that we will use the Excel addition formula. Type = followed by the value of first property + second land property + third land property and the cell will show the total sum of all.

	A	B
1	=2000+3000+6000
2

And if the values are already mentioned in the spreadsheet then cell reference can be used instead of entering numbers in the cells.

	A	B
1	=B1+B2+B3	2000
2		3000
3		6000

Similarly, the difference can be calculated by the excel subtraction formula by replacing + operator to – operator, in the formula. This formula is used when we have to calculate owner/shareholder’s equity, or when we have to find the difference between two figures in a balance sheet.

	A	B
	=2000-3000-6000
2.
3.

Or

	A	B
1.	=B1-B2-B3	2000
2.		3000
3.		6000

The sum function in excel is used when we wish to perform additions without using the + operator. Instead of using =2000+3000+6000, you can use =SUM followed by the reference to two or more of the cell numbers in brackets.

	A	B
1.	=SUM(B1,B2,B3)	2000
2.		3000
3.		6000

A cell reference is a much quicker way of getting the calculations done especially when big figures are involved.

Concluding Remark

Large to small businesses, public to private companies, sole proprietors, partnership firms, and even individuals (for personal use) recognize balance sheets as an essential tool to keep track of the financial spending and earnings. Excel balance sheets templates help them even further by reducing the workload and by proving to be efficient time-wise.

• Companies, both public and private, are required to keep the profit and loss statement and balance sheets according to the 2017’s Amendment to the Companies Act 2013. The format is provided by the legislature of India according to which both these financial statements are to be prepared; these are contained in the new Schedule III.
• Sole proprietors and partnership firms are not required by law to maintain balance sheets but it is only wise to keep one. Even though it is optional, most of the firms and sole proprietors hire accountants to keep regular track of their balance sheets along with other important financial statements.
• Individuals maintain balance sheets mostly as a part of self-discipline. A balance sheet helps in organizing the expenses and let the person know how much he can spend on one particular head of items or what are his assets and liabilities. It is popularly said that a good habit goes a long way, and a person who keeps up with his financial health is less likely to go broke at the end of each month.