Financial Statements of Sole Proprietorship, Page 14

Preparation of a Complete Balance Sheet

The preparation of a complete balance sheet has three steps:

1. Preparation of asset section of balance sheet 
2. Preparation of Liabilities and Owner’s Equity section of balance sheet 
3. Verification

Preparation of the Asset section of a Balance Sheet 

1. Center the word “Asset” on the first line of the statement. 
2. Enter the individual asset’s name on the next line. 
3. Enter individual asset’s account amount in the first column. 
4. Enter the phrase “Total Assets” in the line next to individual assets, leaving half an inch from the left side of the form. 
5. Draw a single line below the last asset amount balance. 
6. Record the total individual asset amount (add all individual asset amounts) in the second column. 
7. Center align the word “Liabilities” in the line next to total assets.

Preparation of the Liabilities and Owner’s Equity section of a Balance Sheet 

8. Record individual liabilities' account names. 
9. Enter the amounts of individual liabilities accounts in the first column. 
10. Draw a single line below the individual liabilities account amount in the first column. 
11. Enter the phrase “Total Liabilities” in the next line, leaving half an inch from the left side, below the last individual liability amount column. 
12. Enter the total in the second column by adding the individual liabilities account amount. 
13. Center “Owner’s Equity” in the line next to total liabilities. 
14. Enter individual Owner’s Equity account names on the left side of the form. 
15. Record the Owner’s Equity (or Capital) amount in the second amount column. 
16. Draw a double line below the total liability amount in the second amount column.

Verification 

Follow these steps for verification of errors: 

1. Add the total liabilities amount and the ending capital balance which should equal the assets amount. If the totals are unequal, check for errors. 
2. Verify that each account balance has been transferred properly to trace any errors. 
3. Find and correct the error to complete the balance sheet. 
4. When the total assets equal total liabilities and Owner’s Equity, draw a double line below the total liabilities and owner’s equity amounts. 
5. This completes the balance sheet.