Balance Sheet Example for Small Business: Free Template
See a balance sheet example for a small business, copy a free template layout, and learn how assets, liabilities and equity balance, with ratios to check.
Quick answer: A balance sheet lists what a business owns (assets), what it owes (liabilities) and the owners' stake (equity) on a single date, and assets always equal liabilities plus equity. The balance sheet example below shows a small business layout you can copy, with every total calculated so you can follow the arithmetic.
Lenders ask for it, accountants build year-end accounts from it, and it is the one report that shows whether your business is financially solid or quietly stacking up debt. Yet many small business owners only look at profit. This guide explains each section in plain language, gives you a template, walks through a complete balance sheet example for a small business, and shows the three or four ratios worth checking every month.
A quick note on tools: our invoice generator creates PDF invoices in your browser; it does not keep accounts or produce financial statements. Your balance sheet comes from bookkeeping software or a spreadsheet. But the invoices you issue become accounts receivable, one of the most important lines on it, so accurate invoicing directly affects the numbers here.
What is a balance sheet?
A balance sheet, also called a statement of financial position, shows the financial position of a business at a moment in time, such as close of business on December 31. Compare it with the profit and loss statement, which measures performance over a period. If the P&L is a video of the year, the balance sheet is a photo taken on the last day.
It rests on the accounting equation:
Assets = Liabilities + Equity
Everything the business owns was paid for either with borrowed money or other people's credit (liabilities) or with the owners' money and retained profits (equity). That is why the two sides must balance.
The three sections explained
Assets
Resources the business owns or controls that have economic value.
- Current assets, expected to become cash or be used within about a year: cash and bank balances, accounts receivable (unpaid customer invoices), inventory and prepaid expenses such as insurance paid in advance.
- Non-current assets, held longer: equipment, vehicles, furniture, property and intangibles such as purchased software or trademarks. These are usually shown at cost less accumulated depreciation.
Liabilities
Amounts the business owes to others.
- Current liabilities, due within about a year: accounts payable (supplier bills), credit card balances, wages owed, sales tax or VAT collected but not yet paid, customer deposits and the portion of loans due in the next 12 months.
- Long-term liabilities: loan balances due after 12 months, equipment finance and some leases.
Equity
The owners' residual claim. For a sole proprietor this is usually owner's capital plus profits minus draws. For a corporation it is share capital plus retained earnings. Our explainer on LLC vs sole proprietorship covers how the business structure changes the equity labels.
Balance sheet template
Use this layout in a spreadsheet. Adjust the line items to match your accounts, but keep the order: most liquid assets first, then the liabilities due soonest.
| Section | Line items |
|---|---|
| Current assets | Cash; accounts receivable (less allowance for doubtful accounts); inventory; prepaid expenses |
| Non-current assets | Equipment and vehicles (less accumulated depreciation); property; intangible assets |
| Total assets | Current + non-current |
| Current liabilities | Accounts payable; credit cards; accrued wages; sales tax payable; customer deposits; current portion of loans |
| Long-term liabilities | Bank loans and equipment finance due after 12 months |
| Total liabilities | Current + long-term |
| Equity | Owner's capital or share capital; retained earnings; less draws or dividends |
| Total liabilities and equity | Must equal total assets |
Balance sheet example for a small business
Here is an illustrative balance sheet example for a fictional landscaping company, "Greenline Services LLC", as of December 31. The numbers are invented to show the arithmetic, not to suggest what is typical.
| Assets | Amount |
|---|---|
| Cash in bank | $18,000 |
| Accounts receivable | $12,500 |
| Inventory (plants, materials) | $4,500 |
| Prepaid insurance | $1,000 |
| Total current assets | $36,000 |
| Equipment and truck at cost | $60,000 |
| Less accumulated depreciation | ($22,000) |
| Net non-current assets | $38,000 |
| Total assets | $74,000 |
| Liabilities and equity | Amount |
|---|---|
| Accounts payable | $6,000 |
| Credit card | $2,000 |
| Sales tax payable | $1,500 |
| Accrued wages | $3,000 |
| Current portion of truck loan | $6,500 |
| Total current liabilities | $19,000 |
| Truck loan, due after 12 months | $15,000 |
| Total liabilities | $34,000 |
| Owner's capital, January 1 | $28,000 |
| Net profit for the year | $36,000 |
| Less owner draws | ($24,000) |
| Total equity | $40,000 |
| Total liabilities and equity | $74,000 |
Checking the arithmetic:
- Current assets: $18,000 + $12,500 + $4,500 + $1,000 = $36,000.
- Net equipment: $60,000 − $22,000 = $38,000. Total assets: $36,000 + $38,000 = $74,000.
- Current liabilities: $6,000 + $2,000 + $1,500 + $3,000 + $6,500 = $19,000. Total liabilities: $19,000 + $15,000 = $34,000.
- Equity: $28,000 + $36,000 − $24,000 = $40,000.
- Check: $34,000 + $40,000 = $74,000, which equals total assets. The sheet balances.
Ratios to read from your balance sheet
Using the Greenline figures:
| Ratio | Formula | Greenline result | What it tells you |
|---|---|---|---|
| Working capital | Current assets − current liabilities | $36,000 − $19,000 = $17,000 | Short-term cushion |
| Current ratio | Current assets ÷ current liabilities | $36,000 ÷ $19,000 ≈ 1.89 | Ability to pay near-term bills |
| Quick ratio | (Cash + receivables) ÷ current liabilities | $30,500 ÷ $19,000 ≈ 1.61 | Liquidity without selling inventory |
| Debt-to-equity | Total liabilities ÷ total equity | $34,000 ÷ $40,000 = 0.85 | How much is funded by borrowing |
There is no universal "good" figure; compare with your own history and your industry. For a deeper look at the first two, read our guide to the working capital formula. If receivables make up a large share of current assets, the accounts receivable turnover ratio shows how quickly customers actually pay.
How to prepare a balance sheet step by step
- Pick the date. Usually the last day of a month or your financial year.
- Reconcile cash. Match each bank and card account to its statement. Our bank reconciliation guide shows how.
- List receivables. Run an aging report of unpaid invoices. Remove any that are truly uncollectible following the bad debt write-off process.
- Count inventory. Value stock on hand at cost.
- Update fixed assets. Add purchases, remove disposals and record depreciation for the period.
- List liabilities. Unpaid bills, card balances, payroll owed, tax collected and loan statements. Split loans into current and long-term portions.
- Record deferred items. Customer deposits for work not yet done are liabilities, as explained in deferred vs accrued revenue.
- Calculate equity and check the balance. If assets do not equal liabilities plus equity, find the error before using the report.
How invoicing shows up on the balance sheet
Every invoice you issue increases accounts receivable; every payment received moves that amount into cash. Invoices that sit unpaid for months inflate current assets on paper while leaving the bank account thin. Sales tax shown on your invoices becomes a liability, not income, until you pay it over. And deposits you invoice before starting a job are liabilities until the work is delivered. Clear, numbered invoices with due dates make each of these lines easier to verify. See the accounts receivable guide for how to manage that balance.
Service business vs product business balance sheets
The structure never changes, but the lines that matter do. A freelance designer or consultant usually has a short balance sheet: cash, receivables, a laptop or two, a credit card balance and owner's equity. For that kind of business, receivables are often the largest asset, so the key question is how quickly invoices turn into cash.
A retailer, manufacturer or contractor carries more: inventory, materials, vehicles, equipment loans and supplier bills. Inventory can tie up a large amount of cash, and its value depends on a careful count. A business like this should watch the quick ratio, which leaves inventory out, as well as the current ratio.
| Line | Typical service business | Typical product business |
|---|---|---|
| Accounts receivable | Often the largest asset | Varies; retail may have little |
| Inventory | Usually none | Often significant |
| Equipment | Computers, small tools | Machinery, vehicles, fixtures |
| Customer deposits | Common for project work | Common for custom orders |
| Accounts payable | Small; software and contractors | Larger; suppliers of stock |
Cash basis vs accrual balance sheets
If you keep cash-basis books, your balance sheet may show no receivables or payables at all, because income is recorded only when paid and bills only when settled. That makes it simpler, but it hides money customers owe you and money you owe suppliers. Lenders often prefer accrual-basis statements for that reason. If you work on a cash basis, keep a separate list of open invoices and unpaid bills so you know the full picture, and ask your accountant whether switching makes sense as you grow.
Common balance sheet mistakes
- Not reconciling bank accounts. Cash is the easiest line to verify and the most common source of errors.
- Leaving dead receivables on the books. Invoices you will never collect overstate assets and equity.
- Forgetting sales tax payable. Tax collected is owed to the government; leaving it out overstates equity.
- Putting the whole loan in one line. Split it into the amount due within 12 months and the remainder.
- Treating owner draws as expenses. They reduce equity directly, not profit.
- Never recording depreciation. Equipment shown at original cost for years overstates assets.
- Using a "plug" to force a balance. A suspense or adjustment entry hides an error that can grow.
Balance sheet checklist
- All bank, card and payment processor accounts reconciled to statements.
- Receivables tie to the aging report; uncollectible items written off.
- Inventory counted and valued consistently.
- Fixed asset register updated, with depreciation recorded.
- Accounts payable match supplier statements.
- Sales tax, payroll liabilities and customer deposits recorded.
- Loans split into current and long-term portions using lender statements.
- Equity rolls forward correctly from the prior period.
- Total assets equal total liabilities plus equity without a plug.
Using the balance sheet to make decisions
Read it alongside your cash flow forecast. A strong current ratio with most of current assets tied up in old receivables is weaker than it looks. Rising debt-to-equity with flat profit suggests borrowing is funding losses. Steadily growing equity, on the other hand, shows that the business is retaining value year after year. The SBA's guidance on how to manage your business finances recommends regular review of financial statements for exactly this reason.
Next step
Pull your receivables list today and check that every invoice on it is real, correct and being chased. Use the balance sheet example and template above to build your own as of last month-end, then repeat it every month. For related reading, browse the business finance category.
Frequently asked questions
What is a balance sheet in simple terms?
A balance sheet is a snapshot of a business's finances on one specific date. It lists what the business owns (assets), what it owes to others (liabilities) and what is left for the owners (equity). It is called a balance sheet because total assets always equal total liabilities plus equity. If the two sides do not match, something has been recorded incorrectly and needs to be found.
What is the balance sheet formula?
The accounting equation is assets = liabilities + equity. You can rearrange it to find any one part: equity = assets − liabilities, or liabilities = assets − equity. For example, a business with $80,000 of assets and $30,000 of liabilities has $50,000 of equity. Every transaction you record affects at least two accounts, which is why the equation stays in balance in double-entry bookkeeping.
Does a small business need a balance sheet?
Most do, even if no law requires one for a very small sole proprietorship. Banks and lenders typically ask for one with a loan application, many tax returns for corporations and partnerships include balance sheet schedules, and it is the only report that shows debts, receivables and owner equity together. Bookkeeping software produces it automatically if your transactions are recorded properly.
What is the difference between a balance sheet and a profit and loss statement?
A profit and loss statement covers a period, such as a month or year, and shows revenue, expenses and profit. A balance sheet shows financial position on a single date. They are linked because the period's net profit, less any owner draws or dividends, is added to equity on the balance sheet. You need both to understand a business fully.
Are unpaid invoices on the balance sheet?
Yes, under accrual accounting. Invoices you have issued but not yet been paid for appear as accounts receivable, a current asset. Bills you have received from suppliers but not paid appear as accounts payable, a current liability. On a pure cash-basis set of books, unpaid invoices may not be recorded at all, which is one reason lenders often prefer accrual-based statements.
What are current and non-current assets?
Current assets are cash and items you expect to convert into cash or use up within about a year, such as receivables, inventory and prepaid expenses. Non-current, or long-term, assets are held for longer, such as equipment, vehicles, buildings and some intangible assets. Liabilities are split the same way into current ones due within a year and long-term ones due later.
What does it mean if equity is negative?
Negative equity means total liabilities exceed total assets, so the business owes more than it owns on paper. It can happen after a run of losses, heavy owner withdrawals or large borrowing. It is a warning sign for lenders and suppliers, though a young business funded by owner loans can show it temporarily. Review it with an accountant if your balance sheet shows negative equity.
How often should I prepare a balance sheet?
Most small businesses review a balance sheet at each month-end close, because it is the best way to catch errors such as an unreconciled bank account, a forgotten loan or sales tax that was never paid over. At minimum, prepare one at your financial year end. Lenders may also ask for an interim balance sheet dated close to the application.
Where do owner draws go on the balance sheet?
Owner draws reduce equity. In a sole proprietorship or partnership they are usually tracked in a draws account inside the equity section, and closed into the owner's capital at year end. They are not an expense, so they do not reduce profit on the profit and loss statement. Corporations pay owners through salary, which is an expense, or dividends, which reduce retained earnings.
Invoice Creator Editorial Team
Guides on invoicing, cash flow and small-business finance from Invoice Creator, operated by Next Software Development Company. Content is reviewed for accuracy against the fields our own invoice generator produces.
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