Key takeaways
What this article covers, in order:
- What a balance sheet shows
- Step 1: Pick the reporting date
- Step 2: Bring the books up to date
- Step 3: Run the adjusted trial balance
- Step 4: List and group your assets
- Step 5: List and group your liabilities
To make a balance sheet, you choose a reporting date, bring your books up to date for that date, take the closing balance of every asset, liability and equity account from your adjusted trial balance, group them into current and non-current, and total them. The test that you have done it right is simple: total assets must equal total liabilities plus total equity.
Below are the eight steps in order, a complete worked example for a small bike shop, tips for building the layout in Excel, and a checklist for when it will not balance.
What a balance sheet shows
A balance sheet (called a statement of financial position under IFRS) is a snapshot of what a business owns and owes on a single date. It has three sections:
- Assets: what the business controls that will bring in future benefit, such as cash, money owed by customers, stock and equipment.
- Liabilities: what the business owes, such as supplier bills, tax due and loans.
- Equity: what is left for the owners, made up of capital they put in plus profits kept in the business.
Unlike the profit and loss report, which covers a period, the balance sheet is always dated at a point in time: "as at 31 March 2026", not "for the year".
Step 1: Pick the reporting date
Most businesses prepare a balance sheet at the end of each month and at their financial year end. Every figure must be the balance on that exact date.
Step 2: Bring the books up to date
A balance sheet is only as good as the ledger behind it. Before you pull any numbers:
- Reconcile every bank, card and loan account to its statement.
- Record all sales invoices and supplier bills dated on or before the reporting date.
- Count stock, or check your inventory records, and adjust to the actual figure.
- Post depreciation for the period on equipment and vehicles.
- Post accruals for costs incurred but not yet billed (wages, utilities) and prepayments for costs paid in advance (rent, insurance).
Step 3: Run the adjusted trial balance
The trial balance lists every account with its debit or credit balance, and total debits must equal total credits. After your Step 2 adjustments it is called the adjusted trial balance, and it is the source for every line on the balance sheet. The income and expense accounts on it go to the profit and loss report; the asset, liability and equity accounts go to the balance sheet.
Step 4: List and group your assets
Split assets into current and non-current. Under IFRS, an asset is generally current if you expect to realise, sell or use it within twelve months of the reporting date or within your normal operating cycle; US practice uses the same idea. Everything else is non-current.
- Current assets: cash and bank, accounts receivable, inventory, prepaid expenses.
- Non-current assets: equipment, vehicles, property and intangible assets, each shown at cost less accumulated depreciation or amortisation.
Step 5: List and group your liabilities
- Current liabilities: accounts payable, accrued expenses, sales tax or VAT payable, income tax payable, customer deposits, and the part of any loan due within the next twelve months.
- Non-current liabilities: the rest of your long-term loans and other obligations due after twelve months.
Splitting each loan between its current and non-current portions is the step most often skipped, and it makes short-term liquidity look better than it is.
Step 6: Work out equity, including retained earnings
For a company, equity is share capital plus retained earnings. Update retained earnings for the period: opening retained earnings + profit for the period − dividends declared. For a sole trader, it is owner's capital plus profit minus drawings.
This is where the profit and loss report and the balance sheet connect. If you leave this period's profit out of equity, the balance sheet will not balance.
Step 7: Total each section and check it balances
Add up total assets, total liabilities and total equity. Total assets must equal total liabilities plus total equity, to the cent.
Step 8: Add comparatives and a date
Show last year's (or last month's) figures in a second column. A balance sheet on its own tells you little; the movement between two dates is where the insight is.
Worked example: Brightwell Bikes balance sheet as at 31 March 2026
Brightwell Bikes is a small company that sells bicycles and runs a repair workshop, including servicing contracts for a local delivery fleet. After reconciling its bank account, counting stock and posting depreciation, its adjusted trial balance gives these figures.
Assets
Current assets
- Cash at bank: €8,400
- Accounts receivable (fleet servicing contracts): €3,100
- Inventory (bikes, parts, accessories): €41,500
- Prepaid rent: €2,000
- Total current assets: €55,000
Non-current assets
- Workshop equipment: cost €24,000 less accumulated depreciation €9,600 = €14,400
- Delivery van: cost €18,000 less accumulated depreciation €6,000 = €12,000
- Total non-current assets: €26,400
Total assets: €81,400
Liabilities
Current liabilities
- Accounts payable to bike and parts suppliers: €12,300
- VAT payable: €2,700
- Accrued wages: €1,800
- Customer deposits on ordered bikes: €3,200
- Van loan, portion due within 12 months: €4,000
- Total current liabilities: €24,000
Non-current liabilities
- Van loan, portion due after 12 months: €8,000
Total liabilities: €32,000
Equity
- Share capital: €10,000
- Retained earnings: opening €27,600 + profit for the year €19,800 − dividends €8,000 = €39,400
- Total equity: €49,400
Total liabilities and equity: €32,000 + €49,400 = €81,400, matching total assets. It balances.
What the finished balance sheet tells the owner
The current ratio (current assets ÷ current liabilities) is 55,000 ÷ 24,000, about 2.3, which looks comfortable. But €41,500 of current assets is stock. Strip out stock and prepaid rent and the quick ratio is 11,500 ÷ 24,000, about 0.48. Brightwell can pay its bills only if it keeps selling bikes. That is the kind of insight a balance sheet gives you that a profit figure never will.
How to make a balance sheet in Excel
- Put account names in column A, the current date's figures in column B and the comparative date in column C.
- Type a heading row with the business name and "Balance sheet as at" the date.
- Group rows under Current assets, Non-current assets, Current liabilities, Non-current liabilities and Equity, leaving a subtotal row under each.
- Use SUM for each subtotal, then add the subtotals for Total assets and Total liabilities and equity.
- Add a check row: Total assets minus Total liabilities and equity. It should show zero. Conditional formatting that turns the cell red when it is not zero saves a lot of hunting.
- Paste values from your trial balance export rather than typing them, to avoid transposition errors.
A spreadsheet works for a one-off or a very small business, but it has no link to the ledger, so every month means re-exporting and re-checking.
Format choices
- Report format: assets first, then liabilities and equity underneath. The most common layout and the easiest to read on screen.
- Account format: assets on the left, liabilities and equity on the right, like the two sides of the accounting equation.
- Order of items: many US companies list items in order of liquidity, cash first. Many IFRS reporters list non-current assets first and put equity before liabilities. Either is fine for a small business if you are consistent.
When the balance sheet will not balance
- Profit not added to equity. Check that retained earnings includes this period's profit.
- Opening balances missing or wrong, often after switching accounting systems.
- Accumulated depreciation entered as a positive asset rather than a deduction.
- Dividends or drawings added instead of subtracted.
- A one-sided entry in a spreadsheet-based system, which a double-entry ledger would not allow.
- A balance sitting in a suspense or uncategorised account. Find out what it is before you finalise.
If the difference is exactly divisible by 9, look for two transposed digits. If it equals a single transaction, look for that transaction posted twice or not at all.
hellobooks< / a > -helps">How HelloBooks helps
HelloBooks generates the balance sheet directly from your double-entry ledger, so it balances by construction and you can compare any two dates. Bank feeds and bank reconciliation get the cash figure right, the fixed assets register posts straight-line or WDV depreciation, and period-end closing handles accruals and prepayments. The year-end close moves profit into retained earnings, and period locking keeps closed months from being changed by accident. You can export the balance sheet or trial balance to CSV if you or your accountant want to work on it in a spreadsheet.
