The Balance sheet is an integral part of a company’s financial documentation. It is usually done by an accountant. The sheet documents the financial status of the company. Stockholders and financial analysts use the balance sheet to check the current value of the company in the market.
Here are some tips on how to keep the Balance sheet balanced.
First of all, memorize the basic equation for accounting. Owner’s equity is equivalent to assets less liabilities. Prior to applying this equation correctly, sort out the balance sheet. Meaning, that the total of all the credits must be equaled with the total of all the debits. This should bring you to the outcome wherein the assets are totaled with a debit balance and the liabilities and owner’s equity with a credit balance. The credit and debit amount must be the same.
Many transactions of the company may occur during this procedure itself. These are recorded by the bookkeeping area. Different types of transactions affect the balance sheet in different ways. To balance the sheet one must keep in mind that these transactions should be recorded precisely.
These are the basics. While recording transactions that show your assets as increased record it as a debit. If the transaction decreases your assets record it as credit.
While recording your transactions which show increase in your liabilities put it down as credit. If the transaction indicates a drop in your liabilities record a debit. Follow the same process for owner’s equity transactions.
In order to balance the Balance sheet one must scan for common bookkeeping errors. Search for increases in assets which have been recorded as credits instead of being recorded as debits. And incase liabilities have gone up yet have been put down as debit instead of credit. Also check if the assets have decreased yet have been recorded as debit in place of credit.
Inspect and compare the Income Statement accounts to the balance sheet accounts to ensure preciseness in tabulation on both records.