Welcome to the Fit Small Business QuickBooks Online training course! In this lesson, we’re going to cover the importance of reviewing your balance sheet report and how to run a Balance Sheet report in QuickBooks Online. We’ll also show you a balance sheet example.

You can follow along on your own QuickBooks Online account. If you don’t have one already, click here to sign up for a free 30-day trial and follow along below.

To complete this lesson, you can either watch the video below, read through the step-by-step instructions, or do both. Let’s begin!

Before we get started with the lesson, it’s worth mentioning that there are affordable virtual bookkeepers that can set-up and manage your QuickBooks for you. They will even help you get caught up if you are behind. For example, SmartBooks offers help with cash flow management, monthly financial statements, payroll processing and more starting at $250/month. Get a free consultation to learn more.

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What is a Balance Sheet?

The Balance Sheet includes the assets, liabilities, and owner’s equity for your business. Assets are those items owned by the company. For example, computers, business equipment, and inventory are assets. Liabilities are what you owe to others. For example, a loan on a vehicle that you use for business or a business line of credit that you have with your bank are liabilities. Owner’s equity reflects the net amount of money that the owner or other investors have invested in the business, as well as money retained from profits (retained earnings).  

Why is the Balance Sheet Important?

It’s important to understand the net worth of your business. The Balance Sheet provides you with the value of the assets you have, what you owe to others, and the net worth (i.e. owner’s equity) of the business. The numbers on the balance sheet represent a snapshot of the financial position of the business at the exact point in time that the Balance Sheet was prepared.

The Balance Sheet is as of a specific date (i.e. December 31, 2016), whereas the Profit & Loss Statement, covered in the previous lesson, is for a period of time (i.e. January 1 – December 31, 2016). This is one of the primary differences between these two financial statements.

What Are the Components of the Balance Sheet? – Balance Sheet Example

To help demonstrate the components of the Balance Sheet, we will use a fictitious company, Paul’s Plumbing. As indicated below, I have identified 4 sections of the Balance Sheet for Paul’s Plumbing.

Balance sheet example

1. Total Assets – In this section, Paul has the following assets listed:
   • A. Bank Accounts – The amounts shown here are what the QuickBooks register reflects as the bank account balance as of September 29, 2016. In the How to Reconcile your Bank Accounts, we walk through step by step how to match up your QuickBooks register with your bank statement.
   • B. Inventory – This is the value of Paul’s inventory on-hand as of September 29, 2016.  To ensure accuracy, an inventory count should be done on an annual basis, and adjustments should be made in QuickBooks to reflect any differences between inventory that you have on the shelf compared to what is in QuickBooks.
   • C. Undeposited Funds – The amount that is sitting in this account is typically credit card sales that have not been deposited to your bank account. In the How to Manage Credit Card Sales lesson, we walk through step by step how to use the undeposited funds account.
2. Total Liabilities – In this section, Paul has the following liabilities listed:
   • A. Outstanding Credit Card Balances – The amounts shown here are what the QuickBooks register reflects as the credit card balance as of September 29, 2016. In the How to Reconcile your Credit Card Accounts we walk you through step by step how to match up your QuickBooks register with your credit card statement.
3. Total Equity – In this section, Paul has the following equity items listed:
   • A. Opening Balance Equity – This is a default account created by QuickBooks. This account should be used to code beginning balances when setting up QuickBooks for the first time. For example, when you set up a bank account  in QuickBooks, you have to enter the opening balance of that account into QuickBooks so that you will be able to reconcile the account later on.  The amount that you enter as an opening balance is coded to the Opening Balance Equity account behind the scenes.  This account should eventually be closed out to retained earnings once you have finished setting up QuickBooks.
   • B. Net Income – This figure comes directly from the “bottom line” of your profit & loss statement (revenue minus expenses). At the end of the year, QuickBooks will automatically transfer this amount to the Retained earnings account.  Retained earnings is an accumulation of the net profit(or loss) in your business since you opened your doors.
4. Total Liabilities and Equity – This is the total of section 2 and 3. From an accounting perspective, Total Liabilities and Equity will always equal Assets. This holds true for Paul’s Balance Sheet report.

Total Assets of $17,976.72 = Total Liabilities and Equity of $17,976.72

How Do I Run a Balance Sheet in QuickBooks Online?

Step 1 – Navigate to the Report Center

From the Home page, click on Reports located on the left menu bar as indicated below.

Step 2 – Report Center

The Balance Sheet is located next to the Profit and Loss report under the Recommended Reports menu as indicated below.

Step 3 – Report Basis

The next screen will only appear the very first time you run a report, such as a balance sheet or P&L Statement. In this screen, QuickBooks will allow you to select which report basis you want to use to run your reports. The two options are cash basis or accrual basis accounting. Most small businesses use cash basis accounting because it is simpler than accrual. If you’re not sure which method you should use, consult your accountant and read more about these two accounting methods in our article Small Business Accounting: Accrual vs. Cash .

Step 4 – Report Filters

From this screen, you have several options to choose from as indicated below.

1. Print – You have the ability to print this report.
2. Email – You can email this report to anyone that you would like to review it (i.e. your accountant or tax professional)
3. Export – You can export this report to Excel and make notes or do further analysis.
4. Customize – This feature allows you to customize a number of areas of the report, including but not limited to the following:
   • General Info: As of Date, report basis
   • Header/Footer: Change or add title or page #
   • Add Sub-columns: Additional columns to do a prior year comparison
5. Collapse – If you use subaccounts, this button allows you to hide that level of detail.
6. Save customizations – Allows you to save any custom changes that you have made to the report so that you can use them for future reports.
7. Transaction Date – Select the time period that you would like to run the report for.
8. Calendar – You can enter a specific date range that you would like to run the report for.
9. Click Run Report button once you have made all of your selections.

Step 5 – Display Report

Click the Finish button, and your Balance Sheet report will display on the screen like the example below for Paul’s Plumbing.

Balance sheet example

Recommended Action Plan

You should now have a pretty good understanding of what the Balance Sheet report is, why it’s important, and how to run a Balance Sheet report in QuickBooks Online.

Here are a few processes that I recommend you put in place immediately:

• Reconcile all bank and credit card accounts on a monthly basis.  
• Implement regular inventory counts to ensure QuickBooks matches actual inventory that you have on the shelf.  
• Review your Balance Sheet report on a monthly basis.
• Be sure any discrepancies between your balance sheet and bank accounts or credit card accounts are handled in a timely manner.
• Be sure that all outstanding monies owed to others has been accounted for (i.e. line of credit, bank loans, personal loans etc;).
• Share your balance sheet with your accountant and tax professional for further guidance.

Wrap Up

That wraps up the section on How to Run a Balance Sheet report in QuickBooks Online. The next lesson in our QuickBooks Online Training Course will be How to Run a Cash Flow Statement in QuickBooks Online. In this course, we will discuss what the Cash Flow Statement will tell you about your business and how to create a Cash Flow Statement in QuickBooks Online.

To access this lesson or any of the others in the series, click here. Or, click here for a free 30-day trial of QuickBooks Online.

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