How to prepare balance sheet
4.5. Step 5: Enter subtotals from trial balances on balance sheet template
The final step is to transfer the classification subtotals from the trial balance (Illustration 6) to the balance sheet template (Illustration 4). For example, we transfer the $391,000 subtotal from the trial balance for Cash & Cash Equivalents to the identical line on the balance sheet template. The result will be a completed balance sheet:
Illustration 7: Completed balance sheet template
Your Company Name |
||
ASSETS |
||
Current Assets: |
||
Cash & Cash Equivalents |
$ 391,000 |
|
Marketable Securities |
0 |
|
Accounts Receivable |
363,500 |
|
Inventories |
289,000 |
|
Prepaid Expenses |
8,400 |
|
Total Current Assets |
1,051,900 |
|
Fixed Assets |
828,000 |
|
Intangible Assets |
140,000 |
|
Investments |
75,000 |
|
Other Non-current Assets |
54,000 |
|
TOTAL ASSETS |
$ 2,148,900 |
|
LIABILITIES |
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Current Liabilities: |
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Accounts Payable |
285,000 |
|
Accrued Expenses |
570,000 |
|
Short-term Loans |
245,000 |
|
Current Portion of LT Debt |
100,000 |
|
Income Taxes Payable |
90,000 |
|
Total Current Liabilities |
1,290,000 |
|
Non-current Liabilities: |
||
Line of Credit |
53,000 |
|
Term Loan |
250,000 |
|
Total Non-current Liabilities |
303,000 |
|
TOTAL LIABILITIES |
1,593,000 |
|
EQUITY |
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Capital |
50,000 |
|
Current Year Earnings |
159,000 |
|
Retained Earnings |
346,900 |
|
TOTAL EQUITY |
555,900 |
|
TOTAL LIABILITIES & EQUITY |
$ 2,148,900 |
|
A few notes about the completed balance sheet:
- The subtotals and totals on the balance sheet (i.e. the $1,051,900 for current assets) were directly determined when all subtotals from the trial balance were transferred to the balance sheet template.
- The total assets of $2,148,900 equal the total liabilities and equity of $2,148,900. However, these totals don't match the trial balance totals for debits and credits of $2,580,400 (Illustration 6). The reason these totals don't match is because in the trial balance the totals are calculated for the debit and credit balances separately. In the balance sheet, though, some credit balances are subtracted from debit balances and vice versa (i.e. due to contra asset and contra liability accounts). Therefore, the totals on the trial balance and the balance sheet may not match.
- Normally, if a particular balance sheet classification has a zero balance (i.e. Marketable Securities in Illustration 7), the classification line is not shown. We left Marketable Securities in there so it is consistent with the balance sheet template (Illustration 4) we prepared earlier. The line for Marketable Securities can be taken out without any "harm" to the balance sheet.
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