As an accounting student, you must familiar with balance sheet. It reflects of the situation of someone asset or organization. Like most student, I was difficult to build balance sheet. We must notes the journal, than classified, count the number, make a ledger, and so the balance sheet is made. The balance sheet is useful for company, corporation, university, foundation even individual. It reflects the financial fitness of any organization or individual.

The balance sheet has two sides (i.e. asset and liabilities). The asset at left side that reflects your asset, meanwhile liabilities is your obligation that position at right. Both sides must have same value or balance. That is way called balance sheet.

An asset is resources of corporation or individual. The asset divides to quick asset and fixed asset. The quick asset is asset that can be cash fast or liquid asset. E.g., money cash, deposit, saving, gold or precious metal etc. Fixed asset has characteristics is difficult to cash e.g, building, furniture, computer, land, etc.

On the other hand, liabilities are your obligation. You must pay the liabilities. The liabilities are your source money to buy asset. For example, a household has liabilities like credit card, loan, car leasing, mortgages, or etc. A corporate has liabilities from notes, bond, short-term debt, and long-term debt. A government has liabilities from government notes, T-Bonds, foreign debt etc.

Other item on right side is equity. The company may raise their asset by publishing equity to stock market.

To make a balance sheet is easy. I give simple example. You have a candy store. You have 100 packs of candy that price is $100 meaning that your asset is $ 100. You have cash on your pocket $100 meaning your cash is 100$. You buy candy with your father money. Therefore, you should settle your debt.

Assumption, you do not have fixed asset. The assets are the summation of the candy and cash or $200. On the left side you still have obligation to your father $100. As I told before, the left side must equal with right side. We know that your asset is $200 but your debt just $ 100. So, where is other $ 100? The other $100 is your equity. After add the equity your liabilities side will be equivalent with asset side.

What happen when candy sold? Your asset is still same but your cash will enlarge. E.g., you sell $50 candy. You get $50 and your cash add to $150. Meanwhile, your candy inventories will decrease to $50. Your assets still it to $200.

A balance sheet depicts the balance of asset and liability. Balance sheet is one of component financial statement that depicts net worth of company.

Make Balance sheet is not difficult especially you have financial or accounting background. Here is some step for making it. You need to see ledger data that accumulate your journal entry:

1. Collect the asset of your company both short term asset and long term asset. Asset is your treasure. You can use them to buy capital, asset or inventory. Short-term asset is the liquid cash or nearly cash example petty cash, bank account and gold. Long-term asset is not liquid asset like receivable, prepaid, lease, building, land, office and furniture, vehicles, etc. 

2. Record your liability both short term and long term. Locate the liability amount in right side of the balance sheet. Short-term liability is defined as a liability that should be settled at least one year. The example of short-term liability is notes, warrant, short-term debt, etc. Reversely, a long-term liability is defined as a liability that could be settled more than one year. The examples of long-term debt are bond, long-term debt, etc.

3. Decrease your asset with liability and the result is your net worth or equity.

Balance sheet is common used with established company but you may build your balance sheet too.