Professional Documents
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The "Balance Sheet", also known as "Statement of Financial Position", shows a company's financial
condition as of a certain date.
Financial condition is presented by reporting how much assets the company owns, how much liabilities it
owes to others, and its equity or capital (assets minus liabilities).
In this tutorial, we will continue the illustration from previous lessons and prepare a balance sheet. Like
the other financial statements we have prepared, we will use this adjusted trial balance: Adjusted Trial
Balance.
$ 7,480
3,700
600
11,780
$ 3,000
16,000
720
18,280
$ 30,060
Note: The above step requires you to be familiar with assets accounts. The next steps will require
knowledge of liability and capital accounts. If you need a review of different accounts, you may visit this
lesson: Elements of Accounting.
$ 7,480
3,700
600
11,780
$ 3,000
16,000
720
18,280
$ 30,060
10,800
12,000
20,800
After including capital, we will take the total amount of "liabilities and capital". That amount is doubleruled.
$ 7,480
3,700
600
11,780
$ 3,000
16,000
720
18,280
$ 30,060
10,800
12,000
22,800
7,260
$ 30,060
Total assets should be equal to total liabilities and capital. If they are not, then something must have gone
wrong during the process.
There you have it. The balance sheet we have just prepared is for a sole proprietorship business. In a
partnership, several capital accounts will have to be presented one for each partner. In a corporation,
the capital portion is known as stockholders' equity and is made up of capital stock, reserves, and ending
balance of retained earnings.