What is commonly the first step in preparing a balance sheet?

The first step in preparing a balance sheet typically involves listing current assets. This is foundational because the balance sheet is structured to show the financial position of a company at a specific point in time, and it starts with the assessment of the company's resources.

Current assets are crucial as they represent the assets that are expected to be converted to cash or consumed within one year. They include cash, inventory, accounts receivable, and short-term investments. By listing current assets first, the accountant establishes the liquidity position of the business, which is vital for stakeholders who assess the company’s ability to meet short-term obligations.

Furthermore, listing current assets sets a logical sequence for the preparation of the balance sheet, as it directly leads to the subsequent listing of non-current assets, followed by liabilities and owner's equity. Understanding the total value of current assets is essential before moving on to total liabilities and owner’s equity, making this initial step crucial in providing a clear and organized presentation of a company’s financial health.