Balance Sheet Formula (Table of Contents)
- Balance Sheet Formula
- Examples of Balance Sheet Formula (With Excel Template)
- Balance Sheet Formula Calculator
Balance Sheet Formula
The balance sheet formula is the accounting equation and it is the fundamental and most basic part of the accounting. The balance sheet will form the building blocks for the whole double entry accounting system. The balance sheet formula will look like:
Examples of Balance Sheet Formula (With Excel Template)
Let’s take an example to understand the calculation of Balance Sheet formula in a better manner.
Balance Sheet Formula – Example #1
Let’s try to prepare Balance Sheet with a simple example. Following are the extracts and information available from ABC Ltd.
Solution:
Total Shareholder’s Equity is Calculated as:
- Shareholder’s Equity = 75,000 + 67,500
- Shareholder’s Equity = 142,500
Total Liabilities is Calculated as:
- Total Liabilities = 13,500 + 25,000 + 2,500
- Total Liabilities = 41,000
Sum of Total Shareholder’s Equity and Total Liabilities:
- Shareholder’s Equity + Total Liabilities = 142,500 + 41,000
- Shareholder’s Equity + Total Liabilities = 183,500
Total Assets is calculated as:
- Total Assets = 25,000 + 25,000 + 83,500 + 30,000 + 20,000
- Total Assets = 183,500
So, now we can see that the balance sheet equation says which is Total assets = Total Liabilities + Total equity’s shareholders and in this case, it is 183,500.
Balance Sheet:
Now in the above given balance sheet, we have calculated Grand total of assets using total current assets and total non-current assets.
Balance Sheet Formula – Example #2
Below extract from Apple Inc. financial statements (annual report) as of 09/30/2017
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Solution:
Total Shareholder’s Equity is Calculated as:
- Total Shareholder’s Equity = 3,58,67,000 + 9,83,30,000 – 1,50,000
- Total Shareholder’s Equity = 13,40,47,000
Total Liabilities is Calculated as:
- Total Liabilities = 4,42,42,000 + 1,84,73,000 + 3,80,99,000 + 9,72,07,000 + 4,04,15,000 + 28,36,000
- Total Liabilities = 24,12,72,000
Sum of Total Shareholder’s Equity and Total Liabilities:
- Shareholder’s Equity + Total Liabilities = 13,40,47,000 + 24,12,72,000
- Shareholder’s Equity + Total Liabilities = 37,53,19,000
Total Assets is calculated as:
- Total Assets = 2,02,89,000 + 5,38,92,000 + 3,56,73,000 + 48,55,000 + 1,39,36,000 + 19,47,14,000 + 3,37,83,000 + 1,81,77,000
- Total Assets = 37,53,19,000
Balance Sheet:
Balance Sheet Formula – Example #3
Below are extracts from Facebook financial statements (annual report) as of 09/30/2017
Solution:
Total Shareholder’s Equity is Calculated as:
- Shareholder’s Equity = 3,82,27,000 + 2,16,70,000 – 7,03,000
- Shareholder’s Equity = 5,91,94,000
Total Liabilities is Calculated as:
- Total Liabilities = 25,05,000 + 2,80,000 + 90,000 +28,92,000
- Total Liabilities = 57,67,000
Sum of Total Shareholder’s Equity and Total Liabilities:
- Shareholder’s Equity + Total Liabilities = 5,91,94,000 + 57,67,000
- Shareholder’s Equity + Total Liabilities = 6,49,61,000
Total Assets is calculated as:
- Total Assets = 89,03,000 + 2,05,46,000 + 39,93,000 + 9,59,000 + 85,91,000 + 1,81,22,000 + 25,35,000 + 13,12,000
- Total Assets = 6,49,61,000
Balance Sheet:
Explanation of the Balance Sheet formula
In its most simple form, the balance sheet formula will try to depict what a company will own, what a company will owe and what stake the shareholders, or the owners have in the company’s business. The equation if one notice then one can conclude that it will start off with the company assets which are the resources of the company and the same has to be used in the near future like the accounts receivable, cash, and fixed assets.
Relevance and Uses of Balance Sheet Formula
Most of the cases, the company will not own its assets outright. For example, it might have borrowed a loan and same be pending on the mortgage on the building, company car, or even it might owe money to its owners or the shareholders. That is the reason the second part of the balance sheet formula is made up of the claims on assets of the company. All these claims on the assets of the company can be separated into 2 broad categories: equity and liabilities.
Liabilities are the claims on the assets of the company by the people or the other firms. A mortgaged or the bank loan is a good example. The bank will have a claim to the company’s land or the building which is mortgaged. Liabilities, on the other hand, are usually presented before equity in the balance sheet formula because the liabilities should be repaid before the shareholder’s or the owners’ claims.
Equity on another hand is the owner’s or the shareholders’ claims on the assets of the company. This will be the amount of money which the owners or the shareholders have contributed to the company for earning an ownership stake. Equity will also include retained earnings. Once all the claims by outside the companies and claims by the owners or the shareholders are summed up, then they will always equal the total assets of the company.
Balance Sheet Formula Calculator
You can use the following Balance Sheet Calculator.
| Total Shareholder's Equity | |
| Total Liabilities | |
| Total Assets Formula = | |
| Total Assets Formula = | Total Shareholder's Equity + Total Liabilities | |
| 0 + 0 = | 0 |
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