Investors, financial analysts and creditors review company balance sheets to make decisions regarding lending or investing in those companies. As a company prepares its balance sheet, it gathers a variety of account balances, including asset accounts, liability accounts and equity accounts. These are permanent accounts with balances that continue indefinitely. The balance sheet presents a picture of the company’s financial position as of the date -- typically, the end of the accounting period -- indicated on the financial statement. As the company prepares this statement, the accountant sometimes runs into missing figures that must be determined.
Calculate the total assets. The total assets listed on the balance sheet must equal the total of the liabilities and the owner’s equity accounts. Review each asset account included on the current balance sheet and calculate the total values.
Add the total liabilities and the owner’s equity accounts. Identify each liability account and each owner’s equity account listed on the current balance sheet.
Find the difference between the total assets and the total of liabilities plus owner’s equity. This determines the amount of the discrepancy between the assets and the total of liabilities and owner’s equity.
Review the adjusted trial balance. The adjusted trial balance provides the balances for every account as of the last day of the accounting period. This includes both balance sheet accounts and non-balance sheet accounts. Highlight each account that needs to appear on the balance sheet, ignoring any account that should not appear there.
Identify any asset, liability or equity accounts missing from the balance sheet. Review the highlighted accounts to determine if they qualify as assets, liabilities or equity accounts. Compare these accounts to those on the current balance sheet. Mark any accounts that do not appear on the balance sheet.
Revise the balance sheet to include the accounts noted on the adjusted trial balance.
Errors other than missing numbers can occur in the balance sheet. The balance sheet may even balance. If the accountant errs when recording a transaction, that error follows through to the financial statement. For example, if the accountant codes a transaction as Insurance Expense when it should have been coded as Prepaid Insurance, the balance sheet will be in error -- even though it will still balance.