In this tutorial, you’ll learn the steps to create a Balance Sheet in QuickBooks Online. The balance sheet is an important financial statement that is a snapshot of what your business owns and owes, usually at the end of an accounting period.
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This tutorial is one of our Free QuickBooks Tutorials. Below the video are step-by-step instructions with screenshots from the most recent version of QuickBooks Online. Although the video was made with a slightly older version of QuickBooks Online, the steps have remained essentially the same.
What Is a Balance Sheet?
A Balance Sheet is a financial statement that summarizes everything your company owns and owes at the end of a period. The first section details what your company owns, known as the company’s assets. Assets include things like cash, bank accounts, accounts receivable (A/R), investments, inventory, buildings, and equipment. The value of the assets shown on the Balance Sheet is called their book value and is often different from the fair market value of the assets.
The second section of the Balance Sheet lists everything your company owes, known as liabilities. Your company’s liabilities are things like accounts payable, credit card debt, car loans, and mortgages. The last section of the Balance Sheet is your owner’s equity, which equals assets minus liabilities. Since the assets are not presented at their fair market value, the owner’s equity section should not be interpreted as the fair market value of the company.
Why Is the Balance Sheet Important?
The Balance Sheet is important because it gives insight into the net worth of your business. While most assets are not presented at their fair market value, the list of assets still provides considerable information about what your business owns and is the starting point for determining the fair market value of your company. The value of liabilities on the Balance Sheet is a good measure of what your company owes and is subtracted from your estimated fair market value of assets to determine your company’s net worth.
Example of the Components of the Balance Sheet
Below is an example of a Balance Sheet with descriptions of each of its components:
Section A: Assets
Generally, Assets are items that your company owns plus amounts that people owe you. Accounts Receivable are invoices where you are waiting for payment from your customers. As you’ve learned in prior tutorials, Undeposited Funds is a clearing account used to group checks into a single bank deposit. Fixed Assets are buildings and equipment owned by your company.
Section B: Liabilities
Liabilities are amounts that you owe your vendors and creditors. Accounts Payable are outstanding invoices that you owe your vendors. While not shown in this example, any mortgages or equipment financing that the company is obligated to pay will also be listed in this section.
Section C: Equity
QuickBooks makes an entry to Opening Bal Equity when you create new accounts with a beginning balance. This should only occur when you initially set up your company, and the amount in Opening Bal Equity should not change after the initial set up.
Retained Earnings is the accumulation of profits within your company. Retained Earnings value on your Balance Sheet is the balance at the beginning of the reporting period. The Retained Earnings on your next Balance Sheet will be Retained Earnings from this Balance Sheet, plus Net Income from this Balance Sheet, less any owner distributions.
Net income shown on your balance sheet must match the net income from your Profit and Loss Report for the same reporting period.
How to Run a Balance Sheet in QuickBooks
You can run a QuickBooks Balance Sheet in four steps:
- Click Reports in the left menu and then select Balance Sheet in the Business overview section.
- View and change options for the Balance Sheet by scrolling up.
- Click Customize to customize the Balance Sheet further.
- Select an icon in the upper right corner of the report to Email, print, or export the Balance Sheet.
1. Create a New Balance Sheet
To create a new Balance Sheet in QuickBooks, choose Reports in the left menu bar and then click on Balance Sheet under Business overview:
2. Set Options for the Balance Sheet Report
Scroll up from the Balance Sheet to access basic options that can be changed for your report:
Choose the following options for your Balance Sheet. You must click Run report (item F) before any changes are reflected in your Balance Sheet.
A. Report period: Choose the period of time for which you are preparing financial statements. You can click the drop-down box to choose a predefined period of time or enter the beginning and end dates for a custom period.
Choose a consistent report period: Since the net income in the equity section of your Balance Sheet should agree to the net income on your Profit and Loss statement, be sure to prepare both reports using the same reporting period.
B. Display columns by: By default, the balance sheet will have a single column for the balances at the end of the reporting period. You can choose to display additional columns for interim balances, such as quarterly, by clicking the drop-down box. You can also display additional columns to separate the balances by customer, vendors, classes, locations or other categories.
C. Show nonzero or active only: The default is to show only rows and columns that have activity during the period. This is a good setting that will avoid unnecessary clutter in your Balance Sheet.
D. Compare another period: You can include an additional column with the prior period Balance Sheet balances for comparison purposes. You can also add a column with the difference between the current and prior periods as either a dollar or percentage change.
E. Accounting method: Choose whether the Balance should be prepared on the cash or accrual basis of accounting. Accrual accounting includes accounts payable and accounts receivable. I recommend using an accrual-basis Balance Sheet for management purposes, even though most small businesses will have to print a cash-basis balance sheet for tax purposes.
F. Run report: Click Run report to apply your changes.
G. Customize: To customize your Balance Sheet further, click Customize.
H. Save Customization: Click Save Customization and name your report if you want to save your Balance Sheet settings. You’ll then be able to choose this customized Balance Sheet from the Reports tab.
3. Customize Your Balance Sheet Further
You can further customize your Balance Sheet by clicking the Customize button, which was item G in the prior section. The Customize report screen contains four sections: General, Rows/Columns, Filter, and Header/Footer.
The first section in the Customize report screen are general options:
The Report period and Accounting method are the same options available in the prior section and should reflect any changes you made there. Unique options in this screen include the ability to report numbers in thousands of dollars, omit cents from your Balance Sheet, and choose a format for negative numbers.
In the Rows/Columns options, you can select columns to include and change the order of the columns:
The % of Column is a nice option to analyze how your total assets are allocated among each asset account. You can reorder the columns by first selecting them and then clicking and dragging them up or down.
You can filter the Balance Sheet by five variables:
Running a Balance Sheet by location might be particularly useful, but only if you are diligent about including the location variable in all your transactions. If Location doesn’t appear in your Filter options, you need to turn on Location tracking in your advanced company settings.
Lastly, you can choose what information to display in the header and footer of the Balance Sheet:
Place a checkmark next to any field you wish to appear on the Balance Sheet. You can also change the name of the company or report that will appear in the header.
Once you are done customizing your Balance Sheet Report, click the green Run Report button at the bottom of the list of customization options.
4. Print or Email Your Balance Sheet
You can print, email, or export your Balance Sheet using the icons in the top right corner of the report:
- Email a PDF of your Balance sheet by clicking on the Email icon.
- Print a copy of your report by clicking on the printer icon.
- Export a PDF file or an Excel spreadsheet by clicking the drop-down arrow next to the export icon.
Congratulations on completing another QuickBooks tutorial and learning how to create a Balance Sheet. Our next tutorial is How to Run a Statement of Cash Flow Report.