Balance Sheet: Template and Example

By Indeed Editorial Team

Updated August 20, 2021 | Published March 20, 2020

Updated August 20, 2021

Published March 20, 2020

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

A balance sheet is an important financial document businesses use to understand their financial status. By calculating and itemizing their assets—what they own—and liabilities—what they owe, they are able to make calculated financial decisions for the wellbeing and future success of their business. More specifically, businesses can subtract their liabilities from their assets to determine their net worth, which is invaluable information for investments, paying back loans and any financial decisions.

In this article, we explain what a balance sheet is and why it’s important and provide you with a template and example to help you create your own.

Related: What Are Financial Statements?

What is a balance sheet?

A balance sheet is a financial document and accounting tool that tracks and records your company's assets, liabilities and equity. It lets you determine your company's financial standing and how resources are allocated. A balance sheet can also help you determine your company's net worth—also known as the owner's or shareholder's equity—when you subtract its total liabilities from its total assets.

Related: What Is a Classified Balance Sheet?

What does a balance sheet include?

Every company's balance sheet looks different because of its unique financial situation and what business transactions they're involved in. Here are three line items you can often find on a balance sheet:

Assets

A company's assets are everything they own. It also refers to unused or unexpired prepaid expenses and costs with a future value. Some assets can include cash, inventory, land, equipment, accounts receivable and both temporary and long-term investments. Here are two types of assets:

  • Current assets: These are typically short-term assets such as cash or inventory that lasts for less than a year.

  • Long-term assets: This can include long-term investments, property, equipment and other assets that aren't turned into cash or consumed within a year.

Liabilities

Limited and unlimited liabilities are a company's financial debts. They can be current or noncurrent and are essentially what they owe another party. Some liabilities include loans, bonds payable accrued expenses, accounts payable and earned and unearned premiums. Here are two types of liabilities:

  • Current liabilities: These are the debts a company pays within a year. They can include wages, short-term loans and accounts payable.

  • Long-term liabilities: Long-term liabilities are debts that last a long time. Some examples include deferred income tax and capital lease obligations.

Shareholders' equity

Also known as owner's or stockholder's equity, shareholder's equity is the company's net value or its remaining claim after it pays its debts. It's the difference between total assets and total liabilities. The amount of assets listed on a balance sheet needs to equal the balance sheet's total liabilities and equity accounts. This gives us the following formula:

Assets = liabilities + equity

A balance sheet lists these in order of liquidity—the order in which they're most easily converted into cash. It also starts by listing the liabilities due to settlement soonest.

Related: How To Create a Balance Sheet: Required Sections and Formats

Balance sheet template

Though balance sheets can look vastly different, they all aim to help you evaluate your financial standing. Here is a balance sheet template to help guide the creation of your own:

[XYZ COMPANY] BALANCE SHEET

[Date]
ASSETS
Current assets:
Cash $000
Investments $000
Accounts receivable $000
Inventory $000
Total current assets $000
Fixed assets:
Property and equipment $000
Equity and other investments $000
Less accumulated depreciation ($000)
Total fixed assets $000
Intangible assets:
Common stock $000
Goodwill $000
Trade names $000
Total intangible assets $000
TOTAL ASSETS $000
LIABILITIES
Current liabilities:
Accounts payable $000
Wages payable $000
Interest payable $000
Taxes payable $000
Total current liabilities $000
Long-term liabilities:
Mortgage payable $000
Notes payable $000
Total long-term liabilities $000
STOCKHOLDERS' EQUITY
Investment capital $000
Retained earnings $000
Total stockholders' equity $000
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $000

Related: How To Create a Balance Sheet (With Examples and Tips)

Balance sheet example

Your company's balance sheet can help you determine the financial areas within your company that need improvement. For example, the balance sheet example shows that this company's liabilities and stockholders' equity outweigh its assets. Based on this information, this company needs to make valuable investments and reassess its assets to make a profit. Use this example to help you better understand the purpose of a balance sheet:

[XYZ COMPANY] BALANCE SHEET

[Date]
ASSETS
Current assets:
Cash $000
Investments $000
Accounts receivable $000
Inventory $000
Total current assets $000
Fixed assets:
Property and equipment $000
Equity and other investments $000
Less accumulated depreciation ($000)
Total fixed assets $000
Intangible assets:
Common stock $000
Goodwill $000
Trade names $000
Total intangible assets $000
TOTAL ASSETS $000
LIABILITIES
Current liabilities:
Accounts payable $000
Wages payable $000
Interest payable $000
Taxes payable $000
Total current liabilities $000
Long-term liabilities:
Mortgage payable $000
Notes payable $000
Total long-term liabilities $000
STOCKHOLDERS' EQUITY
Investment capital $000
Retained earnings $000
Total stockholders' equity $000
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $000

Balance sheet FAQs

Here are some frequently asked questions regarding balance sheets:

What is the difference between an income statement and a balance sheet?

An income statement reports revenues and expenses that lead to a company's profit or loss. A balance sheet lists a company's assets, stockholders' equity and liabilities. Unlike its income and cash flow statement, a company states its balance sheet at the end of the reporting period.

Related: Balance Sheet vs. Income Statement: Definitions and Examples

How do you calculate retained earnings on a balance sheet?

Use the following formula to calculate retained earnings:

Retained earnings = (ending balance of retained earnings from the previous period + net income) - dividends paid to investors

The net income is your company's revenue minus its expenses. This is found on your income statement. The ending balance of retained earnings from the previous period is found in the annual report.

Where are dividends listed on a balance sheet?

Dividends are an expense only included on a balance sheet if they're declared or haven't been paid yet. This makes them current liabilities.

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