How to prepare and analyze a balance (+examples) (2023)

A general balance is one of the three degrees that all companies have to prepare.Experience what balance is and what counts about your business.

A balance as aProfit and loss account (Profit and loss account) and the cash flow statement must be distributed to people outside a company.

ContadorAnd the counters must prepare a balance at the end of each accounting time, especially because the GAAP rules of all American companies demand that it be in a general balance report.

In accounting, general balance amounts are widespread and business owners can provide solid information about the financial health of their business.In the crime, the balances are used both internally and externally for several reasons, including calculation.Operating capitaland monitoringOperational effort.

The amounts of the balance can also be used when performing accounting calculations such asAccountingOr create projections for your company.You will also findFixed costsHow loans andNotes that will be paid in a balance sheet.

General Description: Balance definition

A general balance is an explanation that shows the assets, liabilities and capital of a company at some point..

A balance is notEstablish daily ticketsoClosing inputsHis balance also has its balance directlyNet resultand youCalculation of money flow.

The Balance Sheet Formula

If you are familiar with the populationBilling conditions, You know that all yoursAbilityAccounts must be classified as one of the following classifications:

  • financial assets
  • passive
  • income
  • Cost
  • Capital social

While revenue and production accounts are foundYour profit and loss accountThe balance contains a summary of the value of wealth, the responsibility and actions of your company. The basis of the formula of the general balance that you remember is:

(Video) How To Read & Analyze The Balance Sheet Like a CFO | The Complete Guide To Balance Sheet Analysis

Assets = liabilities + equity

In contrast to a statement of cash flow orAdapted Test BalanceThe general balance is generally not usedCreate budgetthe administrationBusiness expensesInstead, it is intended to help business owners properly monitor assets, liabilities and capital.

Elements of the Balance Sheet

The balance offers three main elements: assets, liabilities and equity, through which the elements of assets and liabilities are divided into two sections.The five elements include:

1. Mayor

Assets are all your company.Examples of assets are cash accounts, cash equivalents,requirements, Inventory, furniture and warehouse.

Assets are generally divided into two categories in their balance sheet, current active and long -term assets.Aktuelle assets see that anything that can be quickly converted into cash.

2. Long -term assets

Long -term assets also include land, machines, devices and long -term plants, as well asIntangible assetsas patents and brands.

3. Liabilities

The liabilities are considered obligations that your company has.For example, liabilities include payment to pay interest,To pay salaries and salaryand customer deposits.

Like assets, liabilities are divided into two categories in their balance: current and liabilities in the long term.The maintenance of liabilities are considered everything that must be paid within a year.

4. Long -term liabilities

Long -term liabilities are obligations that will not be paid in the next year.within a year and should be paid.

(Video) The BALANCE SHEET for BEGINNERS (Full Example)

5. Equity

Integral capital represents the amount of money or its investors invested in the business.The sharing account is also described as capital and represents the net assets of a company.Together with the liability amount, it must match or match its total assets.

6. Assets = liabilities + equity

Assets in your balance should always compensate for the total number of liabilities of your company plus capital.

Example of a general balance

Midway 121.12.2020 services balance

Financial assets
requirements80,000 de of.His.
Total circulation280,000 de of.His.
Capital goods
equipment$ 100,000
Total investment assets400.000.His.
Total assets680.000.His.
Current passive
To pay interest$ 11,000
Tax$ 15,000
Short -term liabilities71,000 de of.His.
Long term passives
To pay notes$ 165,000
Total long -term liabilities236.000.His.
Full responsibility
Capital city295.000.His.
Profit reserves149.000.His.
Owner's equity444.000.His.
Liabilities and total capital of the owner680.000.His.

How to create balances for your small business

The simplest and most precise way to create a balance sheet is to use accounting software.However, you can still create a general balance, even if you use a manual accounting system or spreadsheet software.

Method No. 1: by hand

If you do not have a very small company, it can be extremely difficult to prepare a general balance, but if you follow your accounting transactions in separate accounting books, this is possible.Place.

All the demands you may have would be placed under the current headers, as well as any inventory in stock.Add these sums to obtain your current financial amount.

If you follow fixed assets, you want to include the sum of your fixed assets below.Add your current and fixed assets to reach your assets as a whole.

(Video) How To Analyze a Balance Sheet

Then follow the same process to calculate current and long -term liabilities.Articles, such as accounts to be paid, are considered current liabilities, while bank bonds or loans are considered long -term liabilities.Capture.

Finally, you must calculate the amount of money you have invested in the company.Yedes of another money invested must also be included.

Your manual balance should be seen like this:

financial assetsCrew
Box$ 12,000
Capital goods16,000
Total assets46,000
Commitments and equityCrew
Billing$ 9,000
To pay notes13,000
Owner/investor equity24,000
Liabilities and total capital46,000

Method no.2: Use accounting software

With much, the simplest and most precise way to create a balance sheet is to use accounting software, which can track all its transactions in its accounting software application, it can have a precise balance in seconds.

How to prepare and analyze a balance (+examples) (1)

Wave Accounting offers summary and detailed balances.

Of sharp accounting software applications such asDesktop de QuickBooksYSalbei 50cloud Accounting(previously Peachtree) in recent applications such asWave accountingYXeroThe use of accounting software is the best way to create exact degrees, such as a general balance.

(Video) Vertical Analysis of a Balance Sheet | Explained with Example

Method No. 3: Table

The preparation of a balance with the spreadsheet software is really the same as the manual preparation of a balance sheet, since it still has to enter the sums manually, as it did with the manual method.

While a template can significantly accelerate the process, it must continue to calculate the number and carry out the risk of errors.

How to prepare and analyze a balance (+examples) (2)

Microsoft Excel offers a balance sheet for those who do not use accounting software.

Latest thoughts about the balance sheet

The general balance is required, such as the declaration of cash flow and the profit and loss account in accordance with the GAAP rules.Is valuable.

If you have difficulty creating a balance with the manual system or spreadsheet softwareAccounting program,This simply makes it easier to create all the financial conclusions you need for your company.

Alarm: The highest refund card we have seen has 0% introduction APR by 2024

If you use Wrong's credit or debit card, this can cost your serious money. Our experts amanThis superior selection, the only introduction of 2024 with a cash return interest rate of up to 5% and somehow without annual fee.

In fact, this card is so good that our experts even use it personally.Click here to read our complete evaluationFree and apply in just 2 minutes.

(Video) Analysing Balance Sheet in Excel (+ Examples)

Free Reading Review


1. 📝 How to Read and Understand a Balance Sheet (Apple in Review)
(Leila Gharani)
2. How to Read and Analyze a Balance Sheet for Beginners
(Refined Investor)
3. Comparative Balance Sheet
4. Vertical Analysis - Balance Sheet and Income Statement
(Carolyn Christesen)
5. BALANCE SHEET explained
(The Finance Storyteller)
6. Analyze The Balance Sheet. 4 Questions About Assets
(The Financial Controller)
Top Articles
Latest Posts
Article information

Author: Zonia Mosciski DO

Last Updated: 04/18/2023

Views: 6362

Rating: 4 / 5 (71 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Zonia Mosciski DO

Birthday: 1996-05-16

Address: Suite 228 919 Deana Ford, Lake Meridithberg, NE 60017-4257

Phone: +2613987384138

Job: Chief Retail Officer

Hobby: Tai chi, Dowsing, Poi, Letterboxing, Watching movies, Video gaming, Singing

Introduction: My name is Zonia Mosciski DO, I am a enchanting, joyous, lovely, successful, hilarious, tender, outstanding person who loves writing and wants to share my knowledge and understanding with you.