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# How to construct a balance sheet

## Instructions

Study a current balance sheet. This financial statement shows a reflection of a company's health by listing its assets, liabilities and equities. It is designed by following the standard accounting equation: Assets = Liabilities + Owner's Equity.

Label the statement. All financial statements should include a title, the company name and the date. Title this statement "Pro Forma Balance Sheet." Write in the company name and the date for which you are predicting the information.

Study the assets on the current statement. Assets are things a company owns of value and generally includes three categories. Current assets are assets a company can easily turn into cash within one year or less, such as cash and accounts receivable. Long-term assets are fixed assets such as buildings and machinery. The third category is "other assets." This category is used for assets that do not fit into the other categories.

Make assumptions. Adjust the balances of the accounts that you easily can make assumptions about. If you are planning on purchasing new equipment by the date of the

pro forma, increase the equipment account. If you plan on increasing sales throughout the year, increase the amount owed to you in accounts receivable.

Study the liabilities. Liabilities represent amounts the business owes and are categorized by current liabilities and long-term liabilities. Current liabilities represent amounts the business will pay off in one year or less. Long-term liabilities represent things that will not be paid off in that time frame.

Adjust the balances of the liabilities. Determine if your company plans on financing any large assets this year, or if it plans on paying off a note or another type of debt.

Determine the equity amount. This amount is calculated for a pro forma statement by subtracting the liabilities from the assets.

List all numbers on the statement. List the projected asset amounts on the left side of the statement and the liabilities and equity amounts on the right side. Place the total of all assets on the bottom left-hand side and the total of all liabilities and equities on the right-hand side. Verify that these two amounts are equal.

Source: ehow.com
Category: Forex