What is Balance Sheet?

Sheet of various balance in books of accounts. Normally after all adjustments and after finalisation of various accounts for profit etc.
Differs from Trial Balance.

balance sheet is a statement of the book value of all of the assets and liabilities (including equity) of a business or other organization or person at a particular date, at the end of a period such as a "fiscal year," as distinct from an income statement, also known as a profit and loss account (P&L), which records revenue and expenses over a specified period of time.

Balance Sheet of XYZ, Ltd. as of 31 December 2006

ASSETS

Current Assets
Cash and cash equivalents
[Marketable Securities]
Accounts receivable
Inventories
Prepaid Expenses
Investments held for trading
Other current assets

Fixed Assets (Non-Current Assets)
Property, plant and equipment
Less : Accumulated Depreciation
Goodwill
Other intangible fixed assets
Investments in associates
Deferred tax assets

LIABILITIES and EQUITY

Current liabilities
Accounts payable
Current income tax liabilities
Current portion of bank loans payable
Short-term provisions
Other current liabilities

Long term Liabilities (Fixed Liabilities)
Bank loans
Issued debt securities
Deferred tax liability
Provisions
Minority interest

Equity
Share capital
Capital reserves
Revaluation reserve
Translation reserve
Retained earnings

In formal bookkeeping and accounting, a balance sheet is a statement of the book value of all of the assets and liabilities (including equity) of a business or other organization or person at a particular date, at the end of a period such as a "fiscal year," as distinct from an income statement, also known as a profit and loss account (P&L), which records revenue and expenses over a specified period of time.

A balance sheet is often described as a "snapshot" of the company's financial condition on a given date. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time, instead of a period of time.

A simple business operating entirely in cash could measure its profits by simply withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, real businesses are not paid immediately; they build up inventories of goods to sell and they acquire buildings and equipment. In other words: businesses have assets and so they could not, even if they wanted to, immediately turn these into cash at the end of each period. Real businesses also owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities.

A modern balance sheet usually has three parts: assets, liabilities and shareholders' equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as the 'net assets' or the 'net worth' of the company.

The net assets shown by the balance sheet equals the third part of the balance sheet, which is known as the shareholders' equity. Formally, shareholders' equity is part of the company's liabilities: they are funds "owing" to shareholders (after payment of all other liabilities); usually, however, "liabilities" is used in the more restrictive sense of liabilities excluding shareholders' equity. The balance of assets and liabilities (including shareholders' equity) is not a coincidence. Records of the values of each account in the balance sheet are maintained using a system of accounting known as double-entry bookkeeping. In this sense, shareholders' equity by construction must equal assets minus liabilities, and are a residual.

a sheet in which there is nothing that is balanced but is shown as balanced

A STATEMENT WHICH IS BALANCED IS CALLED BALANCE SHEET.IT HAS ASSET AND LIABILITIES AND WHEN IT BALANCED THAN ALSO CALLED BALANCE SHEET.

Balance Sheet of a co. is that financial statement which reveals its financial position.
It contains firm's assets and liabilities and is of great concern to outsiders like Govt., Economists, Data preparation agencies, Interested investors, Society, Lenders or creditors, Banks n other financial instituitions etc. along with its insiders like entreprenuer, employees, shareholders, etc.

Balance sheet is a T-shaped system of recording data about the firm.

In assets side , which is on the left hand side, there comes all assets or belongings of the firm like machinery, cash, bank balance, furniture, debtors, Investements or Marketable Securities, etc.

Whereas on the right hand side of the balance sheet its liabilities (owings) appear, which include, amount of capital invested, share capital, debentures,Reserves & Surpluses, Creditors, etc. The liabilities side shows what the firms owe to others.

Before preparing the Balance Sheet some other accounts like Journal Entries, Ledgers, Trading a/c, Manufacturing a/c Profit & Loss a/c, and some adjustment a/cs and entries are made. After all these Balance Sheet is prepared.

Balance Sheet is the mirror of the firm's financial position as it reveals in how much water the firm is.
It helps different interested parties in different ways like entreprenuers will be able to know whether it shld continue to run the firm or not, For banks it will help them know whether it is safer to lend money to this firm or not, etc.

Balance Sheet is a periodical statment of an Organisation or Individual showing Assets and Liabilities as they stand on a particular day say 31st March of the year or if Accounting yr of the respective entity is different then on the day on which Accounts are closed, it may be Dec., Sept. etc. But as per Income Tax Act Balance Sheet must be preprepared as on 31st March irrespective of closing of financial year of the Concern. U will find the format in Schedule VI of Companies Act, 1956, as amended. It has to be prepared according to prescribed format. There are Books on Advance Accountancy and students of B.Com i.e. commerce students would know the way of preparing the Balance Sheet and u can see these books in library.

Enter Your Message or Comment

User Name:
User Email:
Post a comment:

Archive: Forum -Forum -Finance - Links - 1 - 2 - RSS - All RSS Feeds
The Causes and the Results. 0.024
Copyright (c) 2011 Financial Crisis Monday, May 28, 2012 - Terms of use - Privacy Policy