How to Prepare a Balance Sheet of Company

Preparation of balance sheet of company is very necessary, because Indian Company law 1956 gives strict instruction about the format of balance sheet of a company. A company can make balance sheet according to the form given in Part I of schedule VI of company law 1956. A company can also make balance sheet summary form, but it has to attach its schedule in which explanation of different components are given. We are explaining different components of balance sheet of company which will be helpful for students to prepare balance sheet of company.

[* Remember the form of balance sheet under Section 211]

You should remember balance sheet and its all components thoroughly. It can be made either horizontal or vertical form. But total of assets should be equal to total of liabilities. Here, I am explaining these components.

Assets Side of Balance Sheet

Assets are written in right side of company’s balance sheet. In these assets, we include.

   1. Fixed Assets

We will show all fixed assets which are purchased and used in business. This is the long term expenditure of company. In these assets, we will include following.

I)                    Land

II)                  Building

III)                Plant and Machinery

IV)               Furniture and Fixture

V)                 Leasehold assets

VI)               Development of property

VII)             Vehicles

VIII)           Live stocks

IX)                Railway sidings

X)                  Equipment

We also include intangible assets in fixed assets head. Following are the main examples of intangible assets.

I)        Goodwill
II)        Patents
III)      Trade marks and design

Depreciation is charged on every fixed asset except land, because value of land will increase after some time. Here, students are given advice that they should calculate the value of net fixed assets, if different fixed assets are purchased or sold during the year. The following table will be the part of working note.

2.  Treatment of Investment in balance sheet

Investment is outflow of fund for getting interest or dividend earning. So, it is the asset of company and will include in assets side. The following are the main investments.

a)                  Investment in Government or trust securities.

b)                  Investment in Shares, debentures or bonds

The following points must be kept in mind while you are showing investment in balance sheet.

i)                    Investment in fully paid up shares must be shown separately from investment in partly paid up shares.

ii)                   Investment in the form of shares in subsidiary company must be shown separately from investment in any other company.

c)                   Investment in immovable properties.

d)                  Investment in the capital of partnership firms.

Investment will be shown on cost or market value which is less.

3.  Treatment of current assets , loan and advances in balance sheet

Current assets will be shown in separate head and following components will be included in it.

i)                    Stock in trade

ii)                   Work in progress

iii)                 Stock of stationary

iv)                 Stock of loose tools

v)                  Stock of stores and spare parts

vi)                 Sundry debtors less provision for doubtful debts

vii)               Cash in hand

viii)              Bank balance

a)      With schedule bank

b)      With other banks

B)      Loan and Advances

The amount which is given by company to others in the form of loan or advances will be shown in asset side. Followings are its main examples.

a)      Advance and loan to subsidiary company

b)      Advance and loan to partnership firm

c)       Bill of exchange / Bill receivables

d)      Advance expenses paid

e)      Outside incomes.

4. Miscellaneous expenditures

Expenses which are not written off will be shown in asset side of balance sheet. There is no market value of these expenses. Examples are given below.

i)                    Preliminary expenses

ii)                   Commission or brokerage of subscription of shares or debentures

iii)                 Discount allowed on issue or shares and debentures

iv)                 Interest paid out of capital during construction

v)                  Development expenditure

5.  Profit and Loss Account

If company suffers net loss after adjusting all reserves, then it will be shown in asset side. This amount can be also deducted from reserves in liabilities side. That time, we will not show it in asset side.

Liabilities Side of Balance Sheet

Liabilities are written in left side of company’s balance sheet. In these liabilities, we include.

1.   Share Capital

In share capital of company, we have to show authorized capital, subscribed capital, called up capital and paid up capital. For calculating paid up capital, we will deduct calls unpaid and add original paid up amount of forfeited shares.

2.   Reserves and Surplus

Following reserves will be shown in liabilities side of balance sheet of company.

i)                    Capital reserves

ii)                   Share premium account

iii)                 Other reserves

iv)                 Surplus balance in profit and loss account after providing dividend, bonus or reserves.

v)                  Sinking fund

3.   Secured Loan

If any loan is taken by company after keeping any asset as security, then it will be shown in secured loan head. Its detail is given below.

i)                    Debentures

ii)                   Loan and advances from subsidiaries

iii)                 Other loan and advances

iv)                 Interest payable on secured loan

4.  Unsecured loan

Following will be the unsecured loan.

i)                    Fixed deposits of public

ii)                   Short term loans and advances

iii)                 Other loans

5. Current Liabilities and Provisions

All liabilities which is payable within one year, will be included in current liabilities head.

A) Current Liabilities

i)                    Acceptance or bill payables

ii)                   Sundry creditors

iii)                 Interest payable other than on loan

iv)                 Outstanding expenditures

B)      Provisions

i)                    Provisions for taxations

ii)                   Proposed dividend

iii)                 Provision for provident fund

iv)                 Provision for insurance, pension and other staff benefit schemes

v)                  Other provisions

6.  Contingent liabilities

These types of liabilities will not be shown in balance sheet. But a simple footnote is made for its detail. Following may be the contingent liabilities of company.

i)                    Claims against the company not acknowledge as debts

ii)                   Uncalled liability on shares paid

iii)                 Areas of fixed cumulative dividends

iv)                 Any other contingent liability of company 

Download our Accounting eBooks

Financial Accounting eBook

Download Now »

Cost Accounting eBook

Download Now »

Corporate Accounting eBook

Download Now »

Management Accounting eBook

Download Now »






access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar Control Your Spending corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Finance Journal Entries Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents Partnership pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching Wealth wikipedia working capital youtube
Accounting Education: How to Prepare a Balance Sheet of Company
How to Prepare a Balance Sheet of Company
Accounting Education
Not found any lecture VIEW ALL Continue reading Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock