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How To Do A Balance Sheet

in this video we're going to go over how

to do a balance sheet and how to format

it correctly and set it up right and

this is another video from accounting

101 org you can visit our website for

more accounting videos tutorials and

explanations like this at accounting 101

org okay so here we have a balance sheet

for scammer corporation and it's on

December 31st 2011 and that's that's one

of the first things that we should point

out about a balance sheet is that a

balance sheet is always a snapshot in

time or in other words at any given

point or on any given day this is our

list of accounts where the business

stands and so that's an important

distinction between the balance sheet or

and the income statement or the cat the

statement of cash flows the statement of

cash flows and the belt or and the

income statement are both statements

that cover a period of time usually the

last quarter or the last year whereas

the balance sheet is like I said just on

any given day it's a snapshot in time

so the first section that you'll see

well first of all you want to notice

that the balance sheet is divided into

two sides the left side which has the

assets and the right side which has

liabilities and stockholders equity so

first we come up here to assets and

you'll usually list your current assets

first and then investments if you have

any property plant and equipment and

then as you come down you will go to

intangible assets and then other assets

so after current assets current assets

are assets that are expected to be used

up within a year so that's why you'll

see things like cash

accounts receivable inventory prepaid

insurance things that will just be used

up within a year on average that's the

assumption anything that goes in current

assets anything after current assets is

non current assets or long-term assets

and so that's everything from

investments to other assets and these

are just assets that are expected to be

around longer than a year and so it

makes sense it's just it's stuff like

land buildings equipment this is where

accumulated depreciation is listed which

just you know brings you to the correct

value of the equipment that's a whole

other discussion and intangible assets

such as goodwill and patents or also you

know long term assets usually even if

they're being amortized they'll be

around longer than a year so they're

listed in long term assets now if we

come over here to liabilities

liabilities are the same as assets and

that they're they're differentiated

between current liabilities and

long-term liabilities so current

liabilities again it's the same thing

any liabilities there that are expected

to be satisfied within a year so you

have accounts payable wages payable

interest payable taxes payable and these

are things that just need to be

satisfied within a year and then you

have long term liabilities which are

liabilities that don't need to be

satisfied within the next year and so

that things like notes payable bonds

payable any major loans or you know just

ending liabilities that don't need to be

paid off within the next year so then

you with total liabilities and then you

start the stockholders equity section

stockholders equity is just what the

owners of the company own

and it's broken down into different

accounts such as common stock retained

earnings other things that could be here

are preferred stock additional paid-in

capital

things like that and because

stockholders equity and liabilities are

both on the right side you know they are

added together and as you see here the

final line is total liabilities and

stockholders equity and over here on

assets you have total assets and these

two amounts will always be the same so

you know you've probably heard assets

equals liabilities plus owner's equity

and that's just the general accounting

equation so assets equals liabilities

plus owner's equity and that's why the

left and right side will always balance

and that's also why it's called the

balance sheet so it's a basic

explanation how to set up a balance

sheet in an example format that you can

follow this has been another video from

accounting 101 org again you can visit

our site for more accounting videos

tutorials and explanations like this at

accounting 101 org