Sample Balance Sheet
| To understand how to prepare a sample balance sheet, let’s trace how Sunny started his now successful business, Sunny Sunglasses Shop. |
As an avid outdoorsman and golfer, Sunny recognized the need for quality sunglasses at a reasonable price. He researched the industry and saw profitable gross margins for retail sunglasses.
He decided to start his business, Sunny Sunglasses Shop, on January 1, 2010. On this day, he withdrew $50,000 from his own personal account and invested it in the business.
Business Balance Sheet Example
| Assets: | |
| Cash | $50,000 |
| Liabilities: | |
| Total Liabilities | $0 |
| Owner’s Equity: | |
| Owner’s Investment | $50,000 |
As a reminder, this affects the accounting equation as follows:
| Assets | = Liabilities | + Owner’s Equity |
| $50,000 | = $0 | + $50,000 |
Sunny Sunglasses Shop purchases inventory for $4,500, and land for future use for $20,000.
Rather than use up valuable cash resources, Sunny puts a $2,000 down payment on the land, and takes out a 15-year mortgage for the balance of $18,000. The mortgage stipulates that $900 is due and payable annually.
Sunny also entered into a credit agreement with its supplier to pay $3,000 cash for the inventory, and pay the balance of $1,500 within 90 days.
Finally, Sunny insured the store for one year by paying $2,400 for insurance.
The business balance sheet now looks like this:
Sample Balance Sheet
Sunny Sunglasses Shop
Company Balance Sheet Example
January 1, 2010
Company Balance Sheet Example
Notice that the balance sheet example maintains the balance of the accounting equation:
| Assets | = Liabilities | + Owners Equity |
| $69,500 | = $19,500 | + $50,000 |
or
| Assets | – Liabilities | = Owners Equity |
| $69,500 | – $19,500 | = $50,000 |
The company spent a total of $7,400 in cash, leaving a balance of $42,600 ($50,000 – $7,400).
The company now has two more assets on the company balance sheet: inventory and prepaid expenses.
The inventory was purchased for $3,000 cash + $1,500 on credit, for a total value of $4,500. The company now has a liability of $1,500 due within 90 days. Accounts payable represents this short-term liability for inventory purchased.
Prepaid expenses for insurance is an asset because it represents an insurance policy for one year, which is a future benefit to the company that has not been consumed yet.
The company also now has a noncurrent asset of $20,000 in land. It is a noncurrent asset because it is expected to last longer than one year.
In this business balance sheet example, Sunny used a classified balance sheet format. The classified balance sheet helps users of financial statements by grouping these accounts into classes such as the function of the account, the business use of the resources, and whether resources and liabilities are short-term or long-term.
The land was purchased with $2,000 cash and a mortgage for $18,000. Part of the cash balance invested in the business that represented owner’s equity was used for the asset land. The land under the accounting equation is thus represented as:
| Assets | = Liabilities | + Owners Equity |
| $20,000 | = $18,000 | + $2,000 |
The $18,000 balance less $900 is considered a long-term liability because Sunny does not need to pay the $17,100 balance within one year. Only the $900 is classified as a current liability since it is due within one year. Owner’s equity remains $50,000, even though the original cash balance of $50,000 that represented the original investment in the business was partially transferred to other assets. In the above example, $2,000 was transferred from cash to land.
Total assets were purchased for $7,400, so a portion of the cash asset simply transferred to other asset types. The company then took on some additional debt to finance additional assets. Therefore, Sunny Sunglasses Shop’s assets and liabilities increased by $19,500 ($18,000 mortgage plus $1,500 of inventory on credit), but the original owner’s equity balance remains the same at $50,000.
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Please establish the balance sheet for Michael carter?
Michael carter has a provision store in south Maryland. The total value of his inventory is $ 4300usd (purchase price) last week he ordered rice in the amount of $ 1200usd, which did not yet arrive. He has a purchase receipt for it. He has 320usd on hand from sales and 650usd at home. He says the money at home is for purchase (350 usd) and for the wedding of his daughter (300usd). This morning he sold two bags of rice (each 32usd) to a client who promised to come and pay tomorrow. Next month his group finishes their loan at liberty finance. He has a remaining balance of 50usd to pay. He has car worth 400usd, which he uses to buy goods sometime. He is also selling cosmetics in his store. His brother is sending him goods from the UK. Two weeks ago the brother sent goods worth 300usd. Michael will pay him within one month. His brother also sent him two new shelves for the business, each worth 200usd, which he paid for.
Hi Dino
When you follow the closing entry process,
you will have negative equity of $100.
So this will balance with the $400 in cash and the $400 in Total Liabilities and owner’s equity ($500 and -$100 respectively).
Thank you for visiting!
Kenneth Meunier
I still have problem with the basics .
Let’s say i opened a company with one employ.
The company has no money invested,
The company bought one computer from supplier for 500£ but did not pay him yet.
The company sold this computer for 1000£,
The company paid wages to the employ for 600£ .
So at the end of this year:
The company has 400£ in bank
The company needs to pay 500£ to the supplier next year,,
How does the balance sheet looks like??
Started with $50,000 and then 50,000-2,000-3,000-2,400
$42,600 is cash not total current assets
how is 42,600 in current assets obtained
If the partner gets to keep a 5% interest in the business even if his initial investment is paid back, then he will essentially get bonus equity since the partner did not have to pay for it. It therefore eventually comes out of the other partner’s account to maintain the 95/5 equity interest, as the 5% interest is greater than the amount contributed (zero). The income and loss of the company are determined by the partnership agreement (income and loss share need not be the same), and in the absence of an agreement are shared equally regardless of capital balances.
If I am the founder and majority owner in the company, but on day one of the company’s existence I get an investor involved with me for 5% of the stock/ownership in my company, plus an agreement to pay back their money with interest…i’m wanting to know how I show the owners equity: my sweat equity and their financial equity?
[…] Look at a sample worksheet to see the format used for preparing a balance sheet. You can find one at http://business-accounting-guides.com/sample-balance-sheet/. […]
give more typical problems
Hi Jassi –
The down payment on land becomes part of the land asset ($2,000 down payment + $18,000 loan = $20,000 for land).
This balances with a credit to cash for $2,000, and $18,000 credit entry for the loan.
I hope this answers your concern and thank you!
down payment of the land $2,000 is missed in it just check it i think you should have mentioned that into prepaid expenses….