Balance Sheet Essentials

Balance Sheet Essentials- Complete Controller

The balance sheet is one of the three vital financial statements presenting a business’ financial standing for a particular period. While balance sheets are usually prepared and presented annually, big corporations and banks have systems to maintain weekly, monthly, and quarterly balance sheets to cater to large business transactions without risking any errors.  

The balance sheet includes the business’s assets, liabilities, equity capital, and the total debt owing or owed. For a balance sheet, the assets and liabilities should be the same amount (Assets = Liabilities + Equity). Complete Controller. America’s Bookkeeping Experts

Having a balance sheet is essential for a business. It determines how much your company owes and if you have enough money to pay your business creditors. You can calculate the accounting liquidity ratios through a balance sheet, giving you even better information about the liquidity position of a business. 

Secondly, when your business needs to take a loan, the business or bank lending you money can quickly identify whether you can pay the money back and if there is no risk in investing in the business through assessing your balance sheet. In short, it can help all the stakeholders of your business.

You must know about the essential elements of a balance sheet before creating it.


An asset is any resource owned and controlled by the business and can be converted into cash. An asset can be tangible or intangible. According to IAS (International Accounting Standards), the first thing to come in a balance sheet is the asset, which splits into two parts: non-current assets and current assets. Non-current assets are long-term assets (in the business for more than one financial accounting year). Examples can include vehicles or the land.CorpNet. Start A New Business Now
Depreciation (a method of allocating the cost of non-current assets over their useful life or expectancy) is charged yearly or monthly on non-current assets. Current assets of a business are the short-term assets of a company that stay in business for less than one financial accounting year, for example, the cash in hand or the bank, the closing inventory. Adding up your current and non-current assets will give you the total assets.

Intangible assets get calculated with the non-current liability; however, most businesses do not include it in the balance sheet. 


After total assets, we calculate the liabilities. Liabilities are anything that your business owes to its stakeholders. Like assets, liabilities are divided into two categories: non-current liabilities and current liabilities. Non-current liabilities are the liabilities that a company owes, and the payback date is after one financial accounting year.

An example can be a long-term loan taken by the 
bank or any other source from where you take the loan and can pay it back after a year. However, a current liability is what a business owes and must pay back within a financial accounting year, such as the supplier’s payment. After calculating the liabilities, you do not get the total liabilities; however, the balance sheet will not balance until you add the capital. 

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The last part that needs to be calculated in a balance sheet is the equity capital. Capital is the amount of money You can return to the shareholders of a business, or if one person owns the company, it is known to be the owner’s equity. The capital is calculated by adding the profit and deducting the drawings from the opening capital.

Moving on, you add it to the liabilities and subtract it from the total assets afterward, and you have a complete balance sheet. The support, liabilities, and capital need to balance to meet the equation: 
Assets = Liabilities + Equity.


balance sheet is necessary for a business to evaluate its capital structure; it is a summary of what the company owes and what it owns, displaying essential information regarding the business’s financial situation for stakeholders to know. 

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