Balance Sheet Statement Preparation Checklist

The Balance Sheet, otherwise known as the Statement of Financial Position, discloses the financial condition of a company at the end of a period of time. It presents a summary of the business's assets, liabilities and stockholders' equity at a given point in time of operations.

It reveals what the business owns, what it owes and what the owner has invested over a period of time.

Procedures on how to go about the preparations of the balance sheet will be shown in detail as its components are explored in the next sections.

You can read this article for more information.

 The basic accounting equation is shown below:

The above accounting equation shows that what a business owns is acquired through a combination of funding arising from both indebtedness(liabilities) and its own money (owner's equity). Hence, balance sheet basically comprises of the following components: Assets, Liabilities and Owner's Equity.

Now you need to create the header of the balance sheet. Fill in the form fields below with the relevant information for ease of access.

Assets are simply defined as anything that the business has ownership of by its acquisition at a certain point in time and recorded in its financial history. Record the relevant assets in the form fields below, and tick through the sub-checklist as you check for asset accounts.

Examples of Asset Accounts that are reported on a company's balance sheet include:

• Cash
• Petty Cash
• Temporary Investments
• Accounts Receivable
• Inventory
• Supplies
• Prepaid Insurance
• Land
• Land Improvements
• Buildings
• Equipment
• Goodwill
• Bond Issue Costs

Current Assets

Current Assets are those that can be converted into cash within one year of the business's normal operating cycle.

• Cash
• Accounts Receivables (A/R)
• Inventory
• Notes Receivables (N/R)
• Prepaid Expenses
• Other current assets

The cash on hand and in bank, accounts/notes receivables, inventories, prepaid expenses that  can be converted into cash within one year of operation, are all basic examples of current assets.

Investments

Investments are Assets Investments whose maturities exceed one year.

Examples:

• Bond Sinking Fund
• Funds held for Construction
• Cash Surrender Value of Life Insurance Policy
• Long-term Investments in Stocks and Bonds

Returns on these investments can be realized over the long-term considering that its payback period is more than a year.

Fixed Assets

Fixed Assets, otherwise known as long-term assets, are those assets holdings with long-term physical value such as land, buildings, etc...

List of fixed assets:

• Land
• Buildings
• Machinery and Equipment
• Furniture and Fixtures
• Leasehold Improvements

With the exemption of landholdings, these long-term assets are subjected to depreciation charges to take into account their decline in value over their useful economic life, through the depreciation method of accounting.

Intangible Assets

Intangible Assets are those assets with significant long-term value without any physicality whose benefits extends a few years or beyond. It is usually recorded at cost based on a specified period of time in the balance sheet.

List of Intangibles:

• Research and Development
• Patents
• Market Research
• Goodwill
• Organizational Expense

Some of these intangibles are amortized over their estimated useful life similar to the accounting practice on the depreciation charges over fixed assets.

Other Assets are those with long-term value but cannot be categorized as current assets, investments, fixed assets or intangible assets.

 List of  Other Assets:

• Deposits (maturity of  more than one year) 
• Notes Receivables from Third Parties
• Bond Issue Costs amortized to expense over the life of the bond .
• Other Deferred Costs (Unamortized Bond Issue Cost)

Computing the total assets is done through the process of adding up current assets to other non-current asset categories such as investments, fixed assets, intangible assets and other assets. Record the total asset value in the form field below.

Identify the enterprise's liabilities and make a comprehensive list of them by using accounting records as reference. Make a list of the enterprise's liabilities in the form fields below.

List of Current Liabilities:  that must be paid within a few months or so within one year or within the company's normal operating cycle.

• Accounts payable bills (credit cards, cell phone bills, electricity and water bills)
• Short-term notes payable
• Taxes payable
•  Wages payable
•  Insurance payable
•  SSS payable
•  Unearned revenues

List of Long-term Liabilities: represent financial obligations that do not have to be paid within one year or within the company's normal operating cycle.

•    Long-Term Notes Payable and Mortgages
•    Bonds Payable
•    Long-Term Capital Leases

List of Contingent Liabilities: represent liabilities that may happen depending on the outcome of some business transactions.

•    Warranty  of Company's Products
•    Guarantee of Another Party's Loan
•    Lawsuits Against the Company

Next, you need to determine the total liabilities value and record it in the form field below.

To compute total liabilities:

Total liabilities are shown on the second part of the balance sheet and will be added to stockholder's equity.

The financial prosperity of the enterprise depends upon how it finds ways to increase its equity or net worth. Coming up with a financial plan where the enterprise can reduce its liabilities while increasing its asset holdings is the best way towards attainment of economic prosperity for the business.

 What comprises Stockholders' Equity Accounts?

• Authorized Capital Stock is the number of shares it is authorize to sell to investor and priced at cost which is the Par Value.
• Subscribed, Issued and Paid-Up Accounts: are the number of shares sold to investors and fully-paid such as Common and Preferred Stock.

Note: The difference between common and preferred stock is that the latter gets priority in receiving dividends.

• Ending Balance, Retained Earnings (R/E) is the earnings retained on previous accounting period.
• Net Income is the net profit generated for the recently-concluded accounting period.
• Dividends Paid in cash declared by the Board of Directors.
• Treasury Shares are shares of the company bought back from another company, sometimes referred to as redemption of stocks.

In financial terms: The higher the equity or the Net Worth of the enterprise, the better off it would be over the long-term.

Next you need to determine the stockholders' equity. Record it in the form field below.

In generally-accepted accounting practice, the basic accounting equation given below is used to arrive at the stockholders' equity equation:

The second-to-last step is to calculate the total for the liabilities and stockholders' equity. Record this in the form field below.

To compute for the Liabilities and Stockholders' Equity:

Once you have all of this data your balance sheet should be complete! Remember to upload a copy to the form field below for safe keeping.

Double-check all the figures and computations, then present the financial statement in its wholeness as follows :

Refer to this article for more information.