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.
Get the template here: Balance Sheet Template
Table of Contents
What is a Balance Sheet?
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.
- Assets: An asset refers to owned things and properties of a company that can be liquidized. Note that only things and resources of value count as assets, such as inventory, investments, and cash. When listing your assets, you want to put the ones that can be quickly converted to cash at the top.
- Liabilities: Liabilities concern the money flowing out of your company’s financial account. Opposite of assets, liabilities refer to financial obligations like outstanding business loans and employee wages that you have yet to settle.
- Equity: Equity is simply the difference between a company’s total assets and total liabilities. It refers to the amount your company still owns after settling your monetary obligations.
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.
Business and Personal Balance Sheet Templates
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.
What Should a Good Balance Sheet Template Google Sheets Have?
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.
- Assets breakdown category
- Liabilities breakdown category
- Owner’s equity section
- Date
- Financial ratios
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.
Get the template here: Balance Sheet Template
How To Use This Free Balance Sheet Template
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.
1. List Your Assets
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.
- Current Assets: These are assets you can encash in one year from your indicated date in the template. Typically, you’ll include your marketable securities, together with your cash, cash equivalents, inventory, prepaid expenses, and accounts receivable.
- Fixed Assets: Properties and equipment you use to gain income for your business count as fixed assets. These are usually long-term items, exceeding at least a year before getting encashed. Fixed assets also depreciate in value due to wear and tear.
- Other Assets: These account for items of value that you own but do not belong to any of the categories we’ve listed above.
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.
Related: Inventory and Sales Tracking Spreadsheet Template
2. Detail Your Liabilities
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.
- Current Liabilities: These refer to outstanding monetary obligations you need to settle within one operating cycle or one year from the date you indicated in the template. Current liabilities include accounts payable (e.g., pending payment to suppliers), income taxes, employee salaries, and short-term debts.
- Long-term Liabilities: Given its name, it’s easy to guess that long-term liabilities are the ones that need to be paid for at least one year and more. These include bonds payable, pension obligations, business loans, lease payments, and other similar expenses.
3. Fill the Owner’s Equity Category
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.
4. Check Your Financial Ratios
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.
- Current Ratio: This indicates the relationship between your current assets and current liabilities. Generally, a good current ratio should be greater than or equal to 1.00. Values lower than that are considered alarming. You can compute it by dividing your current assets by your current liabilities.
- Debt Ratio: This ratio will tell how much leverage you’re using. You can calculate this by dividing your total assets by your total liabilities. Your company will have a good debt ratio if the quotient is less than 0.5. Values higher than that mean that your company is mostly running through debt.
- Debt-to-Equity Ratio: If you’re looking to compare the amount of debt your company has against its total equity, you’ll need this financial ratio. You can find this by dividing your total liabilities by your total owner’s equity. In general, a good debt-to-equity ratio shouldn’t go over 2.00.
- Assets-to-Equity Ratio: This financial ratio tells how much the owner or the shareholders own from the total assets of a company. You can compute this by dividing your total assets by your total liabilities. The optimal ratio is anywhere below 2.00.
- Quick Ratio: The quick ratio is good to use when liquidating your assets in the short term. You can get this figure by determining the difference between your current assets and your inventory and dividing it by your current liabilities. A good ratio is either equal to 1.00 or higher.
Benefits of Using a Balance Sheet Template
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:
- Assessing your financial conditions: Your balance sheet contains the amount of money (liquid or fixed) you currently have, together with any outstanding payments. There are also financial metrics that you can use to determine whether your company has an excellent capacity to handle its monetary obligations.
- Attracting investments: Investors want to see whether you can be trusted before giving you their money. Balance sheets provide the perfect opportunity to showcase your company’s ability to grow your investor’s funds and provide other insights through your financial ratios.
- Making data-driven decisions: Using what you can find on your balance sheets, you can accurately adjust your financial plans for the betterment of your company.
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.
Final Thoughts
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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