Balance sheet not balancing excel

1. 12-27-2020, 12:11 AM

   
   

   #1

   

   
   Forum Contributor
   

   

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   Balance Sheet Not Balanacing
   

   Hello

   This may not be the right place for this (the right forum that is) but i have had such luck in the past getting unstuck with some issues and while this one is embarrassing, I am hoping there is someone with Excel and accounting experience to help me unravel the thing.

   I have had this file for years. I am just now opening it up and looking to get the statements published for a funding round. When i made a ton of adjustments to the workbook to make it more in line with the new model, the balance sheet stopped balancing and for the life of me I can not figure out why.

   If anyone can check the workflow on the attached statements to see if there is a way to get the balance sheet check some to $0, that would be great. This feels like a «Monday Detail» that I am not seeing, but I am working this file in the wee hours of the morning lately.

   I am hoping to wrap this up by year-end for a scheduled launch on a crowdfunding platform.

   original posting: https://www.accountantforums.com/thr…lanced.169616/

   Thanks in advance.

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2. 12-27-2020, 09:19 AM

   
   

   #2

   Re: Balance Sheet Not Balanacing
   

   What did you change? Where has it ‘stopped working’? Please be very specific, directing us to certain cells where you have problems and telling us what results (values) you’d expect to see there.

   Ali

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3. 12-27-2020, 11:53 AM

   
   

   #3

   Re: Balance Sheet Not Balanacing
   

   Please upload the workbook not a zip file. Don’t make us jump through unnecessary hoops.

   Richard Buttrey

   RIP — d. 06/10/2022

   If any of the responses have helped then please consider rating them by clicking the small star icon below the post.

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4. 12-27-2020, 08:18 PM

   
   

   #4

   Re: Balance Sheet Not Balanacing
   

   Ada,

   Hopefully you have an «audit trail» of the «tons» of cells you added, changed or deleted to restructure the spreadsheets.

   The logical thing is to recreate the steps, which will highlight the point at which things went «out of sync». If you can’t resolve that initial error yourself, post the «before and after» section on here and someone will be able to help you with it.
   But asking a freelancer to slog through the entire suite of formulae over the Christmas break and correct any anomolies is really something you should be paying a consultant to do, rather than relying on volunteers to do it all for you free of charge when the output will benefit you commercially?

   Ochimus

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5. 12-27-2020, 10:08 PM

   
   

   #5

   Re: Balance Sheet Not Balanacing
   

   For year 1, for instance, we have only the Ending balance., with unbalance btw asset and liabilities.

   Of course, at begining, it started with zero for every accounts.

   If Debit/Credit in pair, un-banlance issue would not happen.

   Therefore, check again the General Ledger:

   1) Is there any transaction with single A/C ( only debit or only credit) ?

   2) If not, is debit A/C or credit A/C registered in Balance sheet?
   For instant, when you buy a new truck, the transaction recorded:
   Debit «Truck»/ Credit: «Cash»
   But, has forgotten to add «Truck» in list of «Properly, Plant & Equipment» group.

   3) Does the «Retained Earnings» collect «ALL» revenue and cost?

   They are main reasons may caused the unbalance issue.

   If you could not figure it out, try to up load the general ledger, I will see what I can do.

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6. 12-28-2020, 03:00 AM

   
   

   #6

   Re: Balance Sheet Not Balanacing
   

   This has now been marked as solved — is it?

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7. 12-28-2020, 03:10 AM

   
   

   #7

   Re: Balance Sheet Not Balanacing
   

   Ada01, your thread in accountancy forum has no reply so far

   Now you get it (though not sure these solutions/advices work or not), but you get it here, in this forum.

   Is that real «SOLVED»? Waiting to hear from you.

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Balancing Your Balance Sheets

Top 10 ways to fix an unbalanced balance sheet

Financial statements are a series of double entries. When we are setting up our Financial Statements, we must make sure we bring in both sides of the double entries to ensure our balance sheet balances. As Isaac Newton’s Third Law states ‘For every action there is an equal and opposite reaction’; to become a balance sheet king you must remember, ‘For every Debit, there is an equal and opposite Credit’

A balance sheet that doesn’t balance is the nemesis of many a modeller. There is nothing more infuriating than needing to deliver a model and just not being able to track down a balance sheet error, especially as the clock ticks away late into the night.

Don’t worry, I have felt the pain. The below are 10 practical steps that have been finely tuned after sleepless nights and 15 accounting exams. This article will hopefully speed up the process of debugging what is causing the imbalance and help avoid this issue reoccurring during your modelling career.

1. Make sure your Balance Sheet check is correct and clearly visible

Making the correct Balance Sheet check may seem obvious however, there are a few things we must ensure:

a) Net assets equals total equity

Starting from the most basic item, we must make sure that we have correctly linked our formula and that we are checking that net assets less total equity is equal to zero.

b) Appropriate rounding

Excel isn’t perfect, despite what we all may think, Excel only stores up to 15 significant figures. When we are building complex financial models, we will use all 15 significant figures. This can cause really small differences in our net asset and equity. However, when decision making, we may only care to the nearest dollar or cent. Using the ROUND function will ensure that our check has the level of tolerance that is material.

c) Check the absolute difference

Rather than checking each period we should create a global check of each period’s deltas. The most efficient way to do this is by summing all the deltas however, we could have an equal and opposite delta. If this occurred the global check would provide a false result. To avoid this error, always calculate the absolute difference.

d) Clearly visible throughout the model

Once we achieve a balance sheet that does balance, we need to make this check visible throughout the model. This should sit on the top ribbon of our spreadsheet, above any freeze panes you have on your calculation sheet. This will ensure that when we make any updates to model, if we cause an imbalance, we can diagnose it straight away. 

There are alternative methods to Balance Sheet checks. Many modellers will use a logic check to ensure that the delta between equity and net assets is below a certain tolerance number. This works effectively as a check; however, this method won’t help identify what is causing the imbalance.

2. Check that the correct signs are applied

Once we have created our check, our next step is to make sure income and assets are positive and costs and liabilities are negative. An extremely common mistake is missing a negative sign when incorporating items into financial statements. It is so easy to miss and can be hard to pick up. However, a run through of each line item on your Cashflow, Profit and Loss and Balance Sheet will help you identify these errors and is a super easy win.

3. Ensuring we have linked to the right time period

Two of Mazars’ guiding themes are “Keep it simple” and “Get it right”, this is extremely relevant when setting up financial statements.

To “Keep it simple”, Financial Statements should just be links to calculations within the workbook, we should not be performing calculations within them, otherwise there is a high potential for us to exclude this from another section of the statements.

To “Get it right”, we should ensure that we have consistent timing across all our sheets in the model. This will mean when we are linking on our financial statements, we are linking to the same column on our calculation sheet.

For example, if our calculation timeline starts in Column J, we are linking to Column J on our calculation sheets. By doing this we will avoid any misalignment error.

We can then do a simple check that we avoided any misalignment error for each of the first columns. A quick keyboard shortcut to help this is “Ctrl + `”, which will show formulas (“Ctrl + `” will switch it back to normal)

4. Check the consistency in formulae

A key pillar of almost every modelling best practice is consistency in formulae across the row. If we don’t have that consistency, it’s highly likely that your balance sheet doesn’t balance. A way to check formulae consistency is using Go to Special > Row differences. To do this highlight your financial statements formulae and use the shortcut “Ctrl + ”. This shortcut will highlight the cells in that range that have row inconsistencies. We then suggest colouring those cells in a bright colour to pick them out easily.

From here you then need to identify what is the correct formula to use. Don’t simply copy the formula on the left across, you may have corrected the formula midway across the sheet accidently (I’ve made this mistake before).

5. Check all sums

One of the most common errors when building financial models is missing rows within your summed range. When we insert a row above a sum, the range doesn’t update to include that new row.

A quick run through each of the Balance Sheet’s closing balances and your Financial Statement calculations to make sure you haven’t made this mistake. Check a couple throughout the row as another common error is to update the sum for the first column and not copying it across the row. This can also be done through checking the consistency in formulae as suggested in point 4.

It is also important to check the lines within your Cashflow and Profit and Loss to ensure that these are flowing down to your net cashflow and net profit after tax respectively. It’s very common to miss out a line reference in your Cashflow available for debt service (CFADS) or EBIT.

6. The delta in Balance Sheet checks

The above were the easy wins and hopefully you’ve been able to find your Balance Sheet differences. However, it becomes a little trickier from this point on, as its highly likely that you excluded something within your financial statements. So how do we find something that isn’t there?

This is where we create a second check, commonly known as “Balance sheet check 2”, which calculates the delta between two balance sheet checks.

This will allow us to see patterns in how our Balance Sheet imbalance changes,

which can be more informative than the value of the total imbalance. How then do we diagnose these:

a) Look for an exact match

Firstly, check to see if you have an exact match for difference within your financial statements. If you can find an exact match of the difference with one of the line items in your financial statements, it would suggest that you have only incorporated one side of the double entry

b) Consistently the same difference

This is highly likely to be a constant expense or revenue which is not escalated. An example of what is missing is straight line depreciation.

c) Slowly increasing/decreasing difference

When this is the case, we will need to look at things that are affected by inflation or interest rates. An increasing difference would suggest an item affected by inflation such as the revenue or expense, as these values would increase over time. A decreasing difference would suggest an item affected by interest rates, this is as over time the balance will decrease and thus the associated interest and payments. This is not necessarily always the case but should hopefully generate ideas of where to focus your efforts.

d) Jumps in the difference

This is a due to recurring items that don’t happen every period. Examples of this would be debt repayments or capex spend.

e) Unbalanced for a set period

Look at the time horizon that the balance sheet is imbalanced for, was a certain facility active during this period and no other period, this could be the cause of the difference.

Although this check won’t necessarily give you the exact reason for your balance sheet not balancing this will isolate your search. In addition, hopefully when you see the second check, you’ll start to recognise the numbers that you may be missing. You’ll be surprised how familiar numbers become from across the model. The more balance sheets you debug the more familiar you’ll become with this balance sheet check two.

7. Double and half the Balance Sheet check

This is a classic accounting trick; I was taught this while doing my accounting exams and financial audit. Within point 7 we have talked about identifying the difference using patterns, if we haven’t seen a pattern or a number, we are familiar with, by doubling or halving the difference this may allow us to find it. This will often help find items where we have put the incorrect sign and in which case have done two debits for example.

8. Work from right to left

While trying to debug what’s causing your imbalance, work from right to left. We need to identify the area where your Balance Sheet isn’t balancing and thus towards the end of your forecast there are likely to be less items active, for example debt facilities. This will allow us to refine our search, we can then work back to the start of the forecast, hopefully the items that aren’t active all the way to the end could be the causes of the imbalance.

9. Opening balance testing

When reforecasting of an existing Balance Sheet, it’s very easy to make mistakes and not properly incorporate all items. A way to check where these numbers are properly incorporated is changing the numbers and see what happens to your balance sheet check. When changing numbers in your opening Balance Sheet, the retained earnings should be the balancing number (net assets less share capital).

If you change an item on your opening Balance Sheet and your Balance Sheet delta changes, we know that there is an issue with this item. If there is no movement, it means that the appropriate debits and credits have been incorporated and we can move to the next Balance Sheet item.

10. Check changes period to period of Balance Sheet items

The last chance of resolving your issue, is to go through each item on the balance sheet from period to period (remember working right to left) and checking that the balance sheet movements are reflected in the profit and loss and or the cashflow. This can be quite a time-consuming activity but is a systematic way of ensuring all debits and credits have been correctly incorporated in the financial statements and should lead to you finding the imbalance.

Before your model is good to go

A test you should do before you’re finished is to run through all scenarios. Often in our base case financial model, certain functionality won’t be active for example, a Debt Service Reserve Account (DSRA). In our base case we might not expect to use the DSRA, but it may be required in some downside cases. An easy way to do this would be to include your checks within your scenario table to ensure you can detect balance sheet imbalances in non-active scenarios.

If your balance sheet still doesn’t balance after all these steps, you may benefit from attending one of our training courses. Our full course portfolio can be found here.

|November 21, 2013||Mapping, SUBTOTAL, SUMIFS

Excel Balance Sheet

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.

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

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.

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:

=SUMIFS(TB!D:D,TB!C:C,B7)

Where:

• 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.

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!

ExcelBalanceSheet

The balance sheet is a very important financial statement that summarizes a company’s assets (what it owns) and liabilities (what it owes). A balance sheet is used to gain insight into the financial strength of a company. You can also see how the company resources are distributed and compare the information with similar companies.

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No balance sheet statement is complete (in my opinion) without an income statement to go along with it. As a small business owner, I find the income statement to be more useful in the general operation of the business, but the balance sheet is still a critical accounting tool that provides a key piece of information.

The balance sheet informs company owners about the net worth of the company at a specific point in time. This is done by subtracting the total liabilities from the total assets to calculate the owner’s equity, also known as shareholder’s equity (for corporations) or simply the net worth.

Description

Download our free Balance Sheet template, designed for the small-business owner. It includes common financial ratios and works well for a two-year comparison. See below for more information on the different asset and liability categories.

Balance Sheet Essentials

The Accounting Equation: Assets = Liabilities + Owner’s Equity

Current Assets

The term current in a balance sheet generally means «short-term» which is usually one year or less. Common current assets includes cash (cash, coin, balances in checking and savings accounts), accounts receivable (amounts owed to your business by your customers usually within 10-60 days), inventory (goods for sale), and prepaid expenses (e.g. insurance and rent).

Long-Term Assets

These assets include long-term investments, cost of property and equipment (e.g. land, buildings, equipment, tools, furniture, computers, vehicles, etc.) offset by accumulated depreciation, intangible assets (e.g. patents, contracts, trademarks, copyrights, and goodwill), and other assets (like deferred income tax arising from the loss of value of property that cannot be reported as a tax deduction until the property is sold).

Current Liabilities

These include the obligations to be paid within one year, including accounts payable, short-term loans, income taxes payable, wages, unearned revenue (e.g. service contracts), and the current portion of long-term debt (e.g. mortgage payments payable within 12 months).

Long-Term Liabilities

These include long-term debt (e.g. notes, mortgages), capital lease obligations (e.g. leases structured as loans), and deferred income tax (e.g. the tax due on the increase in value of an investment security that isn’t paid until the security is sold).

Owner’s Equity (or Stockholders’ Equity for corporations)

This is basically the amount left over when you subtract Total Liabilities from Total Assets. In includes the owner’s investment(s) and retained earnings (the portion of the profits reinvested in the business). For corporations, there are usually more categories (see the references below).

Balance Sheet References

• Financial Accounting: Reporting and Analysis by M.A. Diamond, E. K. Slice, and J.D. Slice., 2000.
• Balance Sheet, Fixed Assets, Intangible Assets, Deferred Tax, Shareholders’ Equity at wikipedia.org

Disclaimer: This balance sheet spreadsheet and the information on this page is for illustrative and educational purposes only. We do not guarantee the results or the applicability to your financial situation. You should seek the advice of qualified professionals regarding financial decisions.

Balance Sheet Template is a ready-to-use template in Excel, Google Sheets, and OpenOffice that helps you to gain insights into the financial strengths of the company.

Moreover, this Balance sheet template gives you a snapshot of your financial position at a specific time. Usually, the businesses prepare a Balance Sheet quarterly, half-yearly, or yearly.

What Is Balance Sheet?

Balance Sheet is a financial statement of a company. It shows the assets, liabilities, equity capital, total debt, etc. at a given point of time.

In simple terms, a balance sheet shows:

• What your business owns. (Assets)
• What it owes. (Liabilities)
• What money is left for the owner? (Owner’s Equity)

For the balance sheet to reflect the true picture, both heads (liabilities & assets) should tally.

Thus, Assets = Liabilities + Equity.

Components of a Balance Sheet

There are two major components of a balance sheet: Assets and Liabilities.

Assets

Assets are the resources or things that your company owns. It consists of two categories: Current Assets and Long-term Assets. An asset is anything tangible or intangible that you own or hold and has a positive economic value.

Current Assets include the following items:

• Cash
• Accounts Receivable
• Stock/Inventory
• Prepaid Expenses
• Short-Term Investments

Long Term Assets include the following:

• Long-term Investments
• Property, Land, and Equipment. Accumulated Depreciation of all will be deducted from these assets.
• Intangible Assets

Other items include Deferred Income Tax.

Liabilities

Liabilities on are debts or obligations to be paid by a company. It is the amount that the company owes to its creditors.

Liabilities consist of 3 parts: Current Liabilities, Long-term liabilities, and Owner’s Equity.

Current Liabilities include the following:

• Short-term Loans
• Income Taxes Payable
• Accrued Salaries and Wages
• Unearned Revenue
• Current Portion of Long-term Loans

Long-term Liabilities include:

• Long-term Debt/Loans
• Deferred Income Tax

Liabilities include all payments to be made by your company. Therefore, any payable loans, accounts payable, unpaid credit card bills, or unpaid taxes must be included.

Owner’s Equity

Another very important head in the balance sheet is the owner’s equity. Your assets should be equal to total liabilities and owners’ equity.

We use the term Owner’s equity when the company is a sole proprietorship. Shareholder’s equity is used when it is a corporation.

In simple terms, the Owner’s Equity is the claim on the assets of a business. Those Assets which remain after deducting liabilities.

Eventually, Equity includes opening investments, contributions, owner’s capital, or retained earnings.

Thus, Equity = Assets – Liabilities.

Owner’s Equity includes:

• Owner’s Investment
• Retained Earnings

We have created a Balance Sheet Template that summarizes the company’s assets, liabilities, and equity. This will give your lender or investors an idea of the health of the company.

This template can be helpful to Accounts Assistants, Accountants, and Auditors, etc.

Excel Google Sheets Open Office Calc

Click here to Download All Financial Statement Excel Templates for ₹299.

You can also download other templates like Cash Flow Statement, Trial Balance, and Profit and Loss Account.

Let’s discuss the contents of the Balance Sheet Template.

Contents of Balance Sheet Template

This template has 3 sections: Asset, Liabilities, and Owner’s Equity. Owner’s Equity is a part of Liabilities and hence falls under the liabilities section.

Let’s understand what items we will be included in each section.

Asset

Insert the following items:

Cash on hand: All Cash including cash in hand + money in the bank.

Accounts Receivable: Receivable includes the total of your outstanding invoices. This does not include any invoices that are still in “draft” status.

Stock Inventory: Stock Inventory that your company holds for the ultimate purpose of resale. Sold items will not include in the Inventory.

Machinery or Equipment: Any Equipment/tangible items purchased for business usage. This equipment will not be bought for reselling.

Reimbursable expenses: Any reimbursable expenses that are already paid and will be reimbursed by another party.

You can customize the Assets section according to your needs.

Liabilities

Insert the following items:

Accounts Payable: This includes money that you owe to other parties other than loans. An example of this would be any unpaid invoice for any service. It can be advertising, electricity, telephone bills, etc.

Taxes Payable: Unpaid Taxes that you owe the government.

Current Loans Payable: Loans from banks or investment from the investors that you have not paid back yet.

Long Term Loans Payable: The Long-term loans that are yet to be paid.

You can customize the Liabilities section as required.

Owner’s Equity

Insert the following items in the Owner’s Equity.

Owner’s Capital: Capital is the owner’s investment in the company. You need to add the net income earned by the company. Whereas deduct any withdrawals by the owner from it.

Note: The owner’s bank account and the business bank account two are separate entities.

Retained earnings: Net income retained by the corporation and distributed to its owners as dividends.

Important Financial Ratios From Balance Sheet

In the end, we have included some important financial ratios from the Balance Sheet than can be helpful for further analytics:

1. Debt Ratio.
2. Current Ratio.
3. Working Capital.
4. Assets to Equity Ratio.
5. Debt to Equity Ratio.

Advantages of A Balance Sheet

As the name states, it keeps business things in balance. As per the accounting rule, the total assets must be equal to liabilities and equity. Hence, if they don’t balance there is a mistake in the accounting process.

A balance sheet helps in calculating and analyzing financial ratios. Moreover, these ratios are helpful in comparing your competitors as well as your company’s financial strengths.

A balance sheet is also helpful in getting credit from financial institutes. Furthermore, seeing a balance sheet, n investor can make a decision for investment.

Limitation Of A Balance Sheet

Long-term assets are recorded on book value. Whereas, the actual market value is less of those assets. Therefore, these overvalued/undervalued assets distort the company’s wealth.

A balance sheet often misses the internally acquired assets. Furthermore, it also doesn’t take into consideration the assets that cannot be measured in monetary terms. These assets include irreplaceable technical workforce, online sales channels, loyalty, honesty, etc.

Moreover, the balance sheet records some of the assets in estimates that again doesn’t provide the true financial picture of the company.

We thank our readers for liking, sharing, and following us on different social media platforms, especially Facebook.

If you have any queries or questions, share them in the comments below. We will be more than happy to help you.

Frequently Asked Questions

Whether you have a small business or a huge multinational corporation, you need to understand how your company grows. You should therefore keep track of your company’s finances by reviewing various financial statements.

The Income Statement, for example, shows how the organization makes and spends money. Alternatively, the Cash Flow Statement lets you see how much cash you have available, enabling you to budget your expenses correctly.

Lastly, there is the balance sheet, which is also one of the basic financial statements. Here’s a quick guide to help you make your own in Microsoft Excel.

What Is a Balance Sheet, and Why Do You Need One?

A Balance Sheet will let you see the breakdown of your company’s assets, liabilities, and equity. In one glance, you’ll see how much of the company came from retained earnings, owner’s equity, and loans.

With this information on hand, you can compute its return on investment and its various financial ratios. You can then compare these values against similar companies in the same industry. This will give you a sense of how the business is performing versus its peers in the industry.

1. Select the Time to Cover

As with other financial statements, you have to pick a period to cover. Typically, this starts on January 1st and ends on December 31st.

However, you could also choose a different period for computation, called the fiscal year, which begins on Oct 1 and ends on September 30. Do note that whatever period you use here must be consistent across your other statements.

2. Prepare Your Accounts

To avoid the hassle of having to dig through your records when you’re making your balance sheet, you should prepare it beforehand. Make sure to have your cash flow statement, bank statements, loan account statements, and credit card balances available to you.

Before you begin, you need to know the value of the assets and inventory on hand. Don’t forget to include the amount you put down to start your business, as well as investments made by other people and entities.

3. Create the Excel File

Once you know the period you’re covering and have the values you need, it’s time to create the Excel file. Open up a new file on Microsoft Excel. Put in [Company Name] Balance Sheet at cell A1 for easy identification.

Leave some space for formatting, then on the first column of the third row, write Assets. This is the section where you’ll put in the values for everything your company has. Then on the third column of the same row, write the fiscal year you’re covering.

After Assets, you have to create the corresponding Liabilities and Owner’s Equity section. Liabilities refer to the amount the company owes to third parties, including banks, suppliers, landlords, and the government.

Owner’s Equity, on the other hand, refers to the amount the owners raised for the business, plus any earning it retains in its accounts. These values in these two sections should equal the amount noted under assets—hence the term Balance Sheet.

However, before creating the Liabilities and Owner’s Equity section, you should first place the subcategories for Assets. This way, you’ll have less trouble with formatting.

4. Insert Your Categories

Assets

Each business and industry will have its own unique Asset subcategories. However, these are the typical sections most companies have: Current Assets, Fixed or Long-Term Assets, and Other Assets. These are then further broken down into small categories.

Current Assets are assets you can quickly liquidate. These are typically cash, accounts receivable, inventory, and short-term investments. On the other hand, Fixed or Long-Term Assets are harder to convert into currency. These could be Real Properties, Office Equipment, Long-term investments, and more.

Other Assets are usually minor items that can’t be easily defined under current or long-term assets. These could include Prepaid Expenses (like subscriptions), Deferred Tax Assets (like refunds), and Employee Advances.

While these categories apply to most businesses, your company might have a unique asset category, so you should review your operations before considering this as final.

Liabilities & Owner’s Equity

Similar to Assets, Liabilities & Owner’s Equity has three major subcategories: Current Liabilities, Long-term Liabilities, and Owner’s Equity. As the term suggests, current liabilities are obligations that the company must meet either in one year or in one operating cycle (where one operating cycle refers to the time it takes for inventory to be converted into sales).

Current Liabilities could include accounts payable to suppliers and lessors, short-term loans from banks and creditors, income taxes, payable salaries, prepaid goods and services, and the current portion of long-term debt.

Under Long-term Liabilities, you will find Long-term debt, Deferred income tax, and Pension fund benefits, if required by law.

Lastly, Owner’s Equity consists of Owner’s equity, which is the amount you put in the business. If you’re running a corporation, both this section and its subsection are called Shareholders’ Equity instead.

You will also find Retained earnings under the equity section, which is the amount the business earned in the period less dividends paid out.

5. Adding Your Values

Under Assets, add the values for each subcategory to know how much you have for each section. You then need to add each subtotal to get the total asset value of your company.

Likewise, you should also add the values for each Liability and Owner’s Equity subcategory to find how much of your company’s assets are from creditors, the owners, and earnings.

Take note that the total values for the Assets section and the Liabilities and Owner’s Equity section should match. Otherwise, there might have been an error in your accounting.

6. Some Useful Formulas

You can use the values you find in the balance sheet to look at its financial ratios. These formulas assess your business’s performance and can be used for comparison with other similar companies in the same industry.

Debt Ratio

This is the percentage of the company’s debt measured against its assets. The formula for this is Total Liabilities / Total Assets. If you get a value greater than 100%, that means its debt is greater than all its assets. High-ratios are also at a higher risk of default—but this value varies between industries.

Like real estate and utilities, capital-intensive businesses typically get higher average debt ratio values than service industry-based companies.

Current Ratio

This value shows the capacity of a company to pay its short-term loans with its liquid assets. This is computed by dividing current assets by current liabilities. If the value you get here is below zero, there is a danger a company might default on its short-term loans because of a lack of liquidity.

Working Capital

When you subtract a company’s current liabilities from its current assets, you get working capital. This amount shows how much cash and cash equivalent a company has after paying off its current obligations.

If there is a significant positive difference between the two, the company can easily grow and scale its business. But if it’s near zero, or even negative, then it might have trouble paying its loans and liabilities, or worse, could go bankrupt.

Asset-to-Equity Ratio

The Asset-to-Equity (A/E) Ratio is calculated by dividing total owner’s equity by total assets. This formula shows how much the company is funded by the owners versus the amount financed through loans.

A company with a high A/E ratio may indicate that most of its financing came from the owners, meaning it doesn’t have many obligations to pay. On the contrary, a low A/E ratio means that most of its assets came in loans or credits.

If the company has consistent cash flow, a low A/E ratio will have a low impact on its daily operations. However, it leaves it vulnerable to price, interest, and drastic changes, giving them less leeway to react.

Where to Find Balance Sheet Templates

Although you may know now how to create a balance sheet, it’s sometimes better to find a template to follow. You can do that in Excel by clicking on File. Go to the New tab, then in the Search Bar, type Balance Sheet. After a quick search, Excel will give you at least three templates you can use.

Alternatively, you can also visit Vertex42, FreshBooks, or Wise.com to download a template from their website.

Keep Track of Your Business

Whatever business you have, you should keep track of how it’s going. That way, you’re not going in blindly and making decisions without numbers to back you up. After all, a good entrepreneur should know their business like the back of their hand.

A Balance Sheet, Income Statement, and Cash Flow document are just some of the essential documents you need to monitor your finances. But once your business grows and finances become complicated, hire a professional bookkeeper to ensure you get all your numbers right.