# Balance Sheet Formula  ## What is Balance Sheet Formula?

Balance Sheet Formula is a fundamental accounting equation which mentions that, for a business, the sum of its owner’s equity & the total liabilities equal to its total assets, i.e., Assets = Equity + Liabilities. It is based on double-entry system of accounting.

### Understanding Balance Sheet Equation

For eg:
Source: Balance Sheet Formula (wallstreetmojo.com)

The balance sheet equation is the foundation of the . It shows that for every , there is an equal and opposite credit and the sum of all the assets is always equal to the total of all its liabilities and equity.

The balance sheet formula state that the sum of liabilities and owner’s equity is equal to a total asset of the company.

Total Assets = Liabilities + Owner’s Equity

Where,

• Liabilities = It is a claim on the asset of the company by other firms, banks, or people.
• Owner’s Equity = It is s money contribution done by a shareholder of a company for an ownership stake.
• Total Asset = a total asset of a company including equity and liabilities, i.e., asset owe by company and money against the same has to repay back.

### Examples

You can download this Balance Sheet Formula Excel Template here – Balance Sheet Formula Excel Template

#### Example #1

Suppose a proprietor company has a liability of \$1500, and owner equity is \$2000. Calculation of Balance sheet, i.e., Total asset of a company will sum of liability and equity.

In the below-given figure, we have shown the calculation of the balance sheet.

i.e. Total Asset = 1500 + 2000

The total asset of a company is \$3,500.

#### Example #2

A manufacturing company named EON manufacturer Pvt. Ltd has below balance sheet for 5 years, i.e., from the year 2014 to 2018.

Taking the value of the 2018 year,

Sum of total liabilities = \$45,203

The asset is equal to the sum to all assets, i.e., cash, , prepaid expense, and inventory, i.e., \$305,483 for the year 2018.

Similarly, if we want to see the assets of company 5 years back, i.e., in 2014 calculation will be as follows:-

Taking the value of the 2014 year,

Sum of total liabilities = \$62,288

Sum of shareholder’s equity = \$172,474, i.e., a sum of equity capital and retained earnings.

The asset is equal to the sum to all assets, i.e., cash, accounts receivable, prepaid expense, and inventory, i.e., \$234,762 for the year 2014.

By using the above calculation, one can calculate the total asset of a company at any point in time.

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