Balance sheet is an important financial statement to help you monitor the health of your company. A balance sheet gives the clear picture of a company’s net worth in a specific time frame, such as the end of the year. It reflects the company’s assets, liabilities and owner’s equity. It is very important to create and review this financial statement of your business to track the actual growth. The balance sheet is a two column table of statement of items that same, in the sense both the columns should balance. The columns are for the list of assets and liabilities.
Create a Balance Sheet in QuickBooks
Assets comprise of the items of cash and property held by the company. Assets on the balance sheet are further divided into two categories: Current and Non-Current Assets.
Current Assets
Accounts receivable (A/R): It is the amount of money owed to the company by a customer or client that is expected to be paid within a year.
Inventory: comprise of raw materials, works in progress and finished goods produced or acquired for sale to customers in the normal course of business.
Pre-paid expenses: are the amounts for insurance coverage or other expenses that are expected to be used or applied within one year.
Cash: is that money in petty cash, deposits in checking and savings accounts, and any short-term investment.
Marketable securities: includes stocks, bonds and other securities held for investment that are tradable readily.
Non-Current Assets:
Property: includes equipment and machinery, buildings and land, furniture and fixtures.
Intangible property: are copyrights, patents and trademarks, as well as goodwill.
Liabilities are debts or other obligations of the company that have a negative effect on net worth. There are two basic categories of liabilities: Current Liabilities and Long-term/Fixed Liabilities. Current liabilities are liabilities reasonably expected to come due within a year
Current Liabilities
Payables: is the amount of money owed to suppliers and vendors for goods or services bought by the company also referred as accounts payable (A/P).
Unearned revenue: Revenue from a product or service that has yet to be delivered or performed.
Accrued expenses: are the expenses incurred by the business for which there is no invoice, such as wages, employee benefits (e.g. medical insurance, retirement plan contributions) and federal and state taxes
Short-term borrowing: Company credit card bills, lines of credit, etc.
Long-term/ Fixed Liabilities
Mortgages: means borrowing to buy or build the company’s facilities (e.g. buildings, factories, etc.)
Other loans: includes for company vehicles, equipment purchases and loans from shareholders.
Bonds: Debt instruments issued by the company to raise capital (this type of liability is unusual for a small business).
It is the portion of the balance sheet that represents the value of owners’ interest in the company. The value is the amount by which assets exceed liabilities.
Equity of the owner can be comprised of three basic categories:
Capital that owner initially infused into the business.
Additional paid-in capital that owners added to the business after the initial funding.
Retained revenue, which is the earning of the business that have not been distributed to owners but kept in the company.
Positive equity means that assets exceed liabilities. And negative equity means there are more liabilities than assets, and the company is in trouble.
To create a balance sheet manually, use two columns for asset and liability entries of the items. When the sum of liabilities and owners’ equity are totaled, the amount should be equal to the total amount of assets in the left column.
If you use a QuickBooks accounting software, you can generate a balance sheet automatically. You don’t have to enter items into categories, since the software does this for you based on information you have already entered into the system.
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