5-Step Process for Newbies to Draft a Balance Sheet in Accounting Assignment

 A balance sheet is a financial statement of the company containing assets, liabilities, and equities. Most balance sheets are calculated according to this formula:

Assets = Liability + shareholder’s equity

For the balance sheet to reflect the true picture of the company, both sides should tally. It usually calculated after one year, but it can be calculated anytime, even after a month, quarter, or half-year. It is up to the company when they want to prepare it.

Making a balance sheet is a highly skilled task. If you are an amateur and don’t know much about accountancy, you will probably suffer while preparing it. Students often seek accounting assignment help when it comes to the preparation of balance sheets. Taking help isn’t bad, but there is also a 5-step process for the newbies who wish to prepare the balance sheet on their own. The process will surely help them, strangely in a way good manner than they expect.

5 Steps for Newbies to Prepare Balance Sheet

1. Determine the time period or reporting time - The balance sheet’s main role is reporting, which is showing the total assets, liabilities, and equities of a company on a specific date. This specific date is known as reporting date. Different companies choose different time periods for their reporting date. Some use quarterly time periods for reporting (1^st Jan to 31^st Mar), and some half-yearly. Companies that report on an annual basis often use 31^st December as their reporting date, but they can choose any date as per their convenience.

2. Identify the assets according to your reporting date - After identifying the date or time period, the time has come to locate assets according to the reporting date. The total asset is divided into 2 parts- first, current assets, and second, non-current assets. Current assets contain- cash, cash equivalent, short-term securities, inventory, etc. In contrast, the non-current assets include- long-term securities, property, goodwill, intangible assets, etc.

3. Identify your liabilities according to your reporting date - Similar to assets, now it’s time to locate the liabilities. Liabilities are also divided into two parts- first, current liabilities, and second, non-current liabilities. Current liabilities contain- account payable, accrued expenses, deferred revenue, the current part of long term debt, etc. Moreover, the non-current liabilities contain- long-term lease obligations, long-term debts, etc.

4. Calculate shareholder’s equity - Now, incorporate the share capital that the company received from investors as well as retained earnings. Common line items in the section of the balance sheet include - common stocks, preferred stocks, treasury stocks, retained earning.

5. Compare total assets against total liability and shareholder’s equity - Now, the final step is to ensure that both sides ofthe balance sheet are equal or not. In this step, you need to compare total assets against total liabilities and shareholder’s equity.

This write-up is for newbies who are struggling to make a balance sheet. Here they will find 5-step process to draft a balance sheet in a simple and easy way.

SUMMARY

The article shares the basic requirements of making a balance sheet as well as a 5-step guide for the newbies to make their balance sheet with ease.