Balance sheets are part of the golden trio in financial statements. They’re used to report the amount you own and the financial obligations you have to settle. They also contain other metrics, such as assets and liabilities, that outline your financial standing.
Today, we will explore balance sheets, the benefits of using one, and the best balance sheet template for Google Sheets made just for you.
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Knowing the details of a company’s financial conditions is key in evaluating its ability to handle monetary obligations, investments, and growth opportunities. And one of the most reliable financial reporting statements in business is a balance sheet.
This form of financial statement overviews your enterprise’s assets, liabilities, and equity at a particular time. Balance sheets also show how these three categories are related to one another.
From the name of this financial statement, your assets must equal the sum of your liabilities and equity. If they become unequal, your financial statement is off balance and is an unfit “balance” sheet.
Are you required to create or use a balance sheet template? Balance sheet templates are only mandatory among companies and entities that are traded publicly. Still, there’s a lot of room for why this template would benefit you.
For one, they help small businesses understand their current financial health. And with this, the owners can create a more suitable plan to mitigate their liabilities when allocating their monthly or quarterly budget.
A well-organized balance sheet will also help an enterprise looking for investors—a sound financial condition may mean it’s worth investing in.
Additionally, you can also use balance sheet templates for personal uses. This lets you know your net worth (similar to equity) and the overall condition of your finances, while a personal balance sheet template can also help to improve your credit score.
If you’re planning to create your balance sheet or find one online, you’d want to ensure that the following categories are in the template.
You want to be as detailed as possible when listing your assets, so having a dedicated section is essential, allowing you to add any assets you can potentially miss. The same reason is for having separate liabilities and owner’s equity sections.
Balance sheets are not one-off financial statements. They are either prepared monthly, quarterly, or annually at the end of every accounting period. So, having a date field is also necessary for your template.
Lastly, there must be a section for financial ratios, which are said to be the dessert in a balance sheet. They are calculated after listing all your assets, liabilities, and equity. The ratios indicate whether your enterprise has good liquidity, can pay its obligations, and how much profit the company earns.
Our simple balance sheet template features all of these sections and formulas that automate your calculations. To get a copy, simply go to your Google Sheets account and add your monetary details.
Once you open a copy of our free template, you’ll be redirected to the “Balance Sheet” tab. This is where you will enter the details of your financial data.
From left to right, you’ll first see the “Assets” category, which is further divided into three more sections: “Current, Fixed, and Other Assets.” Here, you’ll list all your items and investments that will bring money into your account.
To use this section in our template, simply enter the corresponding amounts in the highlighted cells (the same is true for the Liabilities category in the next part). These are summed up automatically with an overall figure per category.
In the next section, you can include your unfinished debts, wages to settle, and similar expenses under the “Liabilities” section. They’re also categorized into two: “Current and Long-term Liability” categories.
Owner’s equity, also called shareholder’s equity, refers to the total amount of money left after settling all of a company’s liabilities. A better way to visualize it is when you liquidate all your assets to pay off all your debts—the money left is the owner’s equity. These include your investments as the owner, retained earnings, treasury stock, and more.
The amount you put in here gets summed up in its own category. But it’s also added to your liabilities on the outlook. So the sum of the two should equal your total assets.
This section requires no modifications as they automatically get populated as you fill out the other categories. While there are a lot of financial ratios that you can use, we selected five of the most commonly utilized in business.
While balance sheets are only mandatory for publicly traded companies, there are several benefits to using one, even for small business owners or individuals trying to keep their finances in check. Let’s look at the benefits below:
Creating a balance sheet doesn’t mean you need to hire a professional to do it for you, especially if hiring one is outside of your budget or business outlook. If you don’t know where to start, feel free to get a copy of our ready-to-use balance sheet template today.
Balance sheets provide a lot of insights not only for you but also for potential investors. They give you a quick overview of the amount you possess, the pending expenditures and debts you need to pay, and your equity. Creating an accurate balance sheet today can make a huge difference in your finances, so don’t forget to get a copy of our balance sheet template for Google Sheets!
Want to learn more? These Google Sheets online courses are an excellent place to start!
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