Financial Statements - I

The balance sheet is a statement prepared for showing the financial position of the business summarising its assets and liabilities at a given date. The assets reflect debit balances and liabilities (including capital) reflect credit balances. It is prepared at the end of the accounting period after the trading and profit and loss account have been prepared. It is called balance sheet because it is a statement of balances of ledger accounts that have not been transferred to trading and profit and loss account and are to be carried forward to the next year with the help of an opening entry made in the journal at the beginning of the next year.

All the account of assets, liabilities and capital are shown in the balance sheet. Accounts of capital and liabilities are shown on the left hand side, known as Liabilities. Assets and other debit balances are shown on the right hand side, known as Assets. There is no prescribed form of Balance sheet, for a proprietary and partnership firms.

(However, Schedule VI Part I of the Companies Act prescribes the format and the order in which the assets and liabilities of a company should be shown). The horizontal format in which the balance sheet is prepared is shown in the figure . . Balance Sheet of ...........as at March , Liabilities Assets Furniture Add Profit Cash Long-term loan Bank Short-term loan Goodwill Sundry creditors Sundry debtors Bills payable Land and Buildings Bank overdraft Closing stock xxxx xxxx Fig.

. : Format of a balance sheet