If you’re using bookkeeping software, then preparing the balance sheet is often as simple as the click of a button — but what if you’re doing things the old fashioned way? Bookkeeping with physical books, or even with spreadsheets is a different animal and requires a bit more patience.

At the end of an accounting period, after all the journal entries have been posted to the general ledger, the bookkeeper then prepares the trial balance to ensure that debits and credits balance. From there, adjusting entries are added, such as depreciation, bank fees, or interest charges.

There are many account types on the books at this point, such as: revenue, expenses, gains, losses, assets, liabilities, and equity. The balance sheet is unconcerned with most of these, instead being interested only in assets, liabilities, and equity. Eliminate all accounts except those in the preceding three categories.

Under assets, there will be cash accounts, accounts receivable, inventory, and the like. Liabilities will include accounts and notes payable, accrued liabilities, debt, etc. Equity will include accounts like owner’s equity and retained earnings.

Just as in the Accounting Equation, assets equals the sum of liabilities and equity. Ensure that the equation holds. If it doesn’t, look for errors. It’s quite possible that something has been left out, perhaps even a whole account! Once everything’s squared away, format the balance sheet as required by the business owner.

The balance sheet should be prepared at least annually, although many business owners prepare it quarterly — or even monthly — to monitor the financial health of the business.