Balance Sheet

Balance sheet is concerned with reporting the financial position of an entity at a particular point of time. This position is conveyed in terms of listing all the things of value owned by the entity as also the claims against these things of value i.e. Liabilities.

We can come to know the NET WORTH of a business with the help of a Balance Sheet.

Net worth is the value that a company has. It is easily determined using a balance sheet. Your balance sheet will list the company's assets, things the company owns, and its liabilities, which are debts that a company owes. The net worth is the difference between these two amounts. On a balance sheet, a company's assets equals liabilities plus owners equity, so unless you have negative owner's equity, your net worth will always be positive.

Balance Sheet is a sheet containing the balances of real and personal accounts (i.e., balances of assets and liabilities) of a business.

Important features of Balance Sheet.

As regards Balance Sheet, the following points may be noted:

1. A Balance Sheet is prepared only after the completion of the trading and profit and loss account, because the net profit or net-loss as shown by the trading and profit and loss account is to be adjusted in the capital of the proprietor in the Balance Sheet.

2. A Balance Sheet is prepared with the help of all the balances of real and personal accounts appearing in the trial balance and the various adjustments made at the time of the preparation of the trading and profit and loss account.

3. A Balance Sheet consists of two sides, viz., (1) left-hand side and (2) right-hand side. The left-hand side is called "liabilities side" as it contains the various liabilities. The right-hand side is called "assets side", as it contains the various assets. It should be noted that the two sides of the Balance Sheet, viz., the left - hand side and the right-hand side, are not called "debit side" and "credit side", because the Balance Sheet is only a statement, and not an account.

4. The arrangement of debit balances (i.e., assets) and credit balances (i.e., liabilities), in a Balance Sheet is just a reverse of a ledger account. In a ledger account, debit balances appear in the left hand side and credit balances appear on the right hand side. But in a Balance Sheet, debit balances (i.e., assets) appear on the right-hand side and credit balances (i.e., liabilities) appear on the left-hand side.

5. The total of all the assets must be equal to the total of all the liabilities (including the proprietor's capital). In other words, the two sides of the Balance Sheet must agree i.e., balance. It is for this reason that the statement of assets and liabilities is called a balance sheet.

6. The balance sheet is merely a statement and not an account. Therefore, the words "To" and "By" are not used before the various items in the Balance Sheet.

7. The Balance Sheet is prepared as on a particular date and not for a particular period. Therefore, it indicates the true financial positions only on the particular date, and not on any other date.


8. As the Balance Sheet is prepared as on a particular date, it should be headed "Balance Sheet as on or as at".


Let us now look at the proforma of a Balance Sheet.

Balance Sheet as of ………………
Liabilities	Rs	Assets	Rs
Capital	XXX	Fixed Assets:
		Good will	XXX
Fixed Liabilities		Patents	XXX
Long-term loans	XXX	copy rights	XXX
Long-termm Deposits	XXX	Land and Building	XXX
		Plant and Machinery	XXX
Current Liabilities		Vehicles	XXX
Incomes received in advance	XXX	Furniture and Fixtures	XXX
Liabilities for expenses	XXX	Loose Tools	XXX
Sundry creditors	XXX	Long-term Investments
Bills payable	XXX	Current Assets
Bank Overdraft	XXX	Short-term Investments	XXX
Short-term Loans	XXX	Outstanding incomes	XXX
		Prepaid Expenses	XXX
		Closing Stock	XXX
		Sundry Debtors	XXX
		Bills Receivable	XXX
		Cash at Bank	XXX
		Cash in hand	XXX
	XXXXX		XXXXX