Wednesday, May 9, 2012

What is a Balance Sheet ?

Balance Sheet

A balance sheet is a statement of the financial position of the company, it terms of capital, assets and liabilities.  Let us see what goes into the balance sheet and what it reflects.

Assets – Liabilities = Capital
The two sides of the balance sheet show the following:

Left Hand Side
Capital and Liabilities
Where the finances came from
What the business owes

Right Hand Side
Where the finances went to
What the business owns

A balance sheet of the company may have the following information.
Balance Sheet

Liabilities                                  Amount                                    Assets                          Amount         

Sundry or Trade Creditors                                                            Cash in Hand
Bills Payable                                                                                 Cash  
Bank Overdraft                                                                             Cash at Bank
Employees Provident Fund                                                           Bills Receivable
Loans (Cr.)                                                                                    Sundry Debtors
Mortage                                                                                         Loans (Dr.)
Reserve/Res. Fund Capital
Capital                                                                                          Closing Stock
Add Interest on Capital                                                                Investments
Add Net Profit                                                                             Furniture and Fittings
Less Drawings                                                                             Loose Tools
Less Income Tax                                                                          Plant & Machinery
Less Interest on Drawings                                                           Horses & Carts
Less Net Loss                                                                              Land and Buildings
Outstanding Expenses                                                                Freehold/Leasehold Land


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