Balance sheet template (download in Excel)

A balance sheet is one of three essential financial statements that reveal your business’s financial status. It shows what your company owns, its debts, and shareholder equity.

Along with the balance sheet, the income and cash flow statements make up the trio of core financial statements.

This guide will explain what the balance sheet is and why it’s essential for businesses of all sizes.

We also provide a free balance sheet template in Excel for you to download, show you how to complete it, and explain what each section includes.

Here’s what we’ll cover:

What is a balance sheet?

A balance sheet shows a company’s financial position on a specific date, often at the end of an accounting period.

This key financial statement is divided into 3 main sections:

• Assets
• Liabilities
• Shareholders’ equity

The balance sheet is also called a “statement of financial position”.

Unlike other reports that track changes over time, it captures a single moment in your business finances.

Its value lies in comparing it with past sheets to track shifts and patterns, but also in providing information about solvency, cash flow details, and credit risk.

Businesses rely on the balance sheet for both internal planning and external reporting.

It lists a company’s assets (what it owns), liabilities (what it owes), and equity (the owners’ residual value after subtracting liabilities from assets).

This breakdown helps you evaluate your company’s liquidity and whether the business can cover long-term obligations.

For example, a high equity value suggests stability, while heavy liabilities could signal risk.

Why is a balance sheet important?

A balance sheet gives you a clear snapshot of your finances at a specific point in time.

Here’s why this report matters:

• Lenders often use it to assess creditworthiness before approving funding
• You can spot financial vulnerabilities (like rising debt over time)
• Make informed decisions about operations, investments, and growth strategies 
• Investors use it to assess your financial health before investing
• They’re often required for regulatory purposes, tax filings, or audits

How the balance sheet works

The balance sheet is a historical report that owners can use to make business decisions to keep the company on the right financial path.

The sheet balances assets against liabilities and shareholders’ equity and follows a simple formula:

Assets = Liabilities + Shareholders’ Equity

The formula shows exactly how your business is funded.

Every asset you own is paid for by either borrowing (liabilities) or using owner funds and profits (equity). This keeps the balance sheet even, with both sides matching up neatly.

The balance sheet structure is easy to follow and understand, with assets first, followed by liabilities and shareholder equity.

The key to keeping your balance sheet “balanced” is your assets must always add up to the same total as liabilities and equity combined.

You should note that balance sheets vary by business size and industry.

For example, a small retailer might list basic assets like cash and inventory, while a manufacturer includes complex items like machinery depreciation.

For public companies, accounting standards add another layer of complexity.

GAAP (generally accepted accounting principles) requires specific formats, while IFRS (International Financial Reporting Standards) might allow more flexibility.

For US-based small and medium businesses, GAAP will be your go-to framework.

Timing matters when you prepare a balance sheet, since it captures your finances on one specific day.

If you run a business with seasonal shifts, such as a gift shop, prepare your balance sheet right after your busy period (January, for example) to see a clear picture of cash and inventory.

What’s included in a balance sheet?

Let’s break down the three main parts of the balance sheet, so you can see how it all fits together, especially if you’re using a balance sheet template for small business.

Assets

Assets are everything your business owns that has value.

They’re split into 3 types: current, fixed, and other assets.

You’ll find these asset categories in any solid balance sheet template.

Current assets

Current assets represent short-term assets which you can use or convert to cash within a year.

Common examples include cash, accounts receivable, inventory, and short-term investments.

These assets power your daily operations. For a small or medium-sized business, this might be most of what you track.

Fixed assets

Fixed assets are also called non-current or long-term assets.

They can include tangible items used over multiple years to run the business.

For example, property like your office building, equipment for production, or vehicles for deliveries.

Fixed assets often lose value due to use or aging, and companies record this decline as depreciation over their useful life.

If you’re manually tracking depreciation, we can automate that, helping you stay accurate and saving you time.

Other assets

The other assets category captures anything not classified under current or fixed assets.

It can include intangible assets like patents, trademarks, goodwill, or long-term investments that aren’t expected to be liquidated in the near term.

Liabilities

Liabilities are your pending financial obligations, essentially anything your business owes to others.

Just like assets, they’re divided into current and long-term liabilities.

Liabilities should be included in any free balance sheet template to help you keep debts organized.

Current liabilities

Current liabilities represent all debts that need to be paid off within 12 months.

This includes short-term loans, unpaid bills to suppliers, or taxes you need to pay soon. By managing current liabilities, you can meet short-term commitments without hurting your cash flow.

Long-term liabilities

Long-term liabilities stretch out further than a year, such as mortgages and long-term loans.

If you intend to grow your business or make capital investments, you’ll want to actively monitor your long-term liabilities to control debts to ensure financial stability.

Equity

Equity reflects the ownership interest in the business after deducting all liabilities from assets.

Equity includes money owners put in, like initial investments or stock sales.

It also adds retained earnings, which are profits you’ve kept instead of paying out. 

For growing businesses, equity is a key indicator of financial health and long-term value creation.

If you’re using a balance sheet template for a small business, it’s often the bottom line.

Balance sheet template 

How to complete your balance sheet

A simple balance sheet template allows you to structure financial data in an orderly format.

Whether you’re closing the fiscal year or preparing for a lender review, accurate information is key.

Our balance sheet template includes columns for 2024, 2025, and the change between them, so you can see how your numbers shift year-over-year.

Comparing these lets you spot patterns, like ample cash reserves or a rising loan balance.

For instance, if your inventory jumped from $10,000 to $15,000, you might be stocking up for expansion.

This side-by-side view helps you plan smarter and catch issues early.

Follow this simple step-by-step guide to complete the main sections of the balance sheet.

Step 1: Gather your financial records

Start by collecting your financials for the specific date.

You’ll need your bank statements, accounts receivable report, inventory list, loan agreements, and owner investment records.

Step 2: Fill in the date and business information

At the top of your balance sheet, enter your business name and the exact date of the report.

A balance sheet shows a snapshot in time, so this date should reflect the end of the reporting period. It’s usually month-end, quarter-end, or year-end.

Step 3: Complete the assets section

Current assets

List all assets your business expects to convert into cash within a year, including:

• Cash and cash equivalents (funds in checking or savings accounts)
• Accounts receivable (outstanding customer invoices you expect to collect)
• Inventory (goods available for sale)
• Prepaid expenses (items like insurance or rent you’ve paid in advance)
• Short-term investment
• Other current assets

Add these up to get your total current assets.

Noncurrent (Fixed) assets

Next, list long-term assets your business uses over time. These typically include:

• Land and buildings
• Furniture and equipment
• Computers
• Vehicles
• Other fixed assets
• Accumulated depreciation (reduction in asset value over time)

For each, include the original purchase cost and subtract accumulated depreciation to show net value. Add these values to get your total noncurrent assets.

Other assets

Finally, for other assets, enter the rest of your assets that are neither current nor fixed, such as:

• Trademarks and patents
• Goodwill
• Security deposits
• Investments
• Other assets

Total assets are the sum of your current, noncurrent and other assets. Enter this figure at the bottom of the assets section.

Step 4: Complete the liabilities section

Current liabilities

These are obligations due within a year, including:

• Accounts payable
• Sales tax payable
• Corporate taxes payable
• Accruals
• Payroll liabilities
• Other current liabilities
• Current portion of long-term loans and debt

Long-term liabilities

These are debts and obligations due beyond 1 year. Common examples include:

• Notes payable
• Mortgages
• Loans
• Other long-term debt
• Other long-term liabilities

Add these to your current liabilities to get your total liabilities.

Step 5: Complete the equity section

Equity is the value left in the business after subtracting liabilities from assets.

It represents ownership in the business.

Typical line items include:

• Capital stock (for corporations)
• Owner/partner contribution (for sole proprietors, LLCs, and partnerships)
• Owner/partner distribution (for sole proprietors, LLCs, and partnerships)
• Retained earnings

Add these to calculate your total equity.

Step 6: Confirm everything balances

If the two sides don’t match, go back and verify the entries and calculations. Your assets should equal liabilities plus equity.

Hence, the formula: Assets = Liabilities + Shareholders’ Equity.

Balance sheet example

Let’s look at a hypothetical example from a fictional coffee shop, BrewCafe, to help you apply this formula to your business.

The coffee shop owner puts together a balance sheet to check finances as of December 31, 2024.

Below is the entry for their assets:

• Current assets: They have $8,000 in cash from sales, $2,000 owed from a catering job, and $5,000 in inventory for coffee beans and cups, which add up to $15,000.
• Fixed assets: The shop has a $30,000 espresso machine, now valued at $25,000 after $5,000 in accumulated depreciation, plus $10,000 in tables and chairs. That’s $35,000 for fixed assets.
• Other assets: They have a $1,000 lease deposit, making the sum of other assets $1,000.

Total assets come to $15,000 + $35,000 + $1,000 = $51,000.

The owner calculates the following for their liabilities:

• Current liabilities: They owe their supplier $3,000 and have an outstanding loan of $1,000 due within three months as the current portion of a $16,000 equipment loan. Total current liabilities are $4,000.
• Long-term liabilities: The remaining $15,000 of the equipment loan, payable over four years, is listed here. Total long-term liabilities are $15,000.

Total liabilities are $4,000 + $15,000 = $19,000.

Then finally, they calculate their equity.

The owner started with $20,000 in owner contributions and has $12,000 in profits saved up. That’s $20,000 in capital plus $12,000 in retained earnings, equaling $32,000.

Following the formula:  Assets = Liabilities + Equity, the result is

$19,000 + $32,000 = $51,000

Their assets are $51,000 and the sum of their liabilities and equity also equals the same. Hence, the balance sheet balances.

It may help to keep this example in mind when using your own numbers. Take your balance sheet template, add your details, and you’ll have a clear view of your business’s financial health at a given time.

What are the limitations of a balance sheet?

Like any financial tool, a balance sheet has its limitations:

• It reflects a single point in time and doesn’t show trends or changes over a period.
• Most assets are listed at their original purchase price, not current market value, so they may be over- or undervalued.
• Short-term issues might go unnoticed without reviewing other statements, like the income statement and cash flow statement.
• Some figures, such as accumulated depreciation and allowances for doubtful accounts, rely on estimates, which can vary depending on who prepares them.

In short, a balance sheet is useful, but it’s only one piece of the puzzle.

Use it alongside other statements for a clearer view of your business’s financial health.

To streamline financial reporting and make balance sheet preparation faster and more accurate, many businesses use accounting software.

It can help automate calculations, reduce errors, and organize your data in a way that makes it easy to complete essential statements like your balance sheet, income statement, and cash flow report. 

FAQs

Do all businesses have to produce a balance sheet?

Not every business is required to create a balance sheet.

If you’re a sole proprietor or part of a small partnership, there’s no legal mandate to produce one.

For publicly traded ones, it’s different.

They must file balance sheets with the SEC (Securities and Exchange Commission) quarterly and annually under US regulations.

Private companies, including many SMEs, aren’t obligated to, but using a balance sheet can still provide the information you need to understand your financial position.

It all depends on your needs and external expectations.

What is the difference between a balance sheet and an income statement?

The balance sheet and the income statement are two core financial statements for a company.

But, they have different purposes and present different types of financial information.

Balance sheet

A balance sheet shows your financial position at a specific point in time.

It lists what your business owns, what it owes, along with the equity held by shareholders.

The balance sheet provides critical information on a company’s liquidity, solvency, and capital structure and is vital for assessing the company’s financial stability and capability to handle its obligations.

Income statement

An income statement, on the other hand, tracks your revenues and expenses over a period such as a quarter or a year.

The primary purpose of the income statement is to showcase how the revenues are transformed into net income (or net loss) by deducting all expenses from the total revenue.

This includes operating expenses, cost of goods sold, taxes, and other expenses.

On a basic level, it tells you whether the business made a profit or a loss during that time.

Together, the income statement and balance sheet provide a comprehensive view of a company’s financial health, each from a different perspective but both are essential for a complete financial analysis.

What are the uses of a balance sheet?

A balance sheet helps owners, investors, and lenders understand how stable and solvent a business is.

It shows whether the company has enough assets to cover its liabilities, how much debt it holds, and how much value has been built over time.

It also supports decisions around financing, investment, and growth.

When is a balance sheet prepared?

Balance sheets are usually prepared at the end of a financial period.

Depending on the size of the business and its reporting needs, they might be prepared monthly, quarterly, or annually.

Some businesses also prepare one when applying for loans or attracting new investors.