Balance Sheet

Definition of Balance Sheet

Balance sheet is that part of final accounts in which we show the assets and liabilities of company on specific date for knowing the financial position of company. So, this financial statement is also called financial position statement. This report provides knowledge about what are our main current assets, current liabilities, fixed assets and capital. From which source we have taken loan and how have we utilized this loan. Either money may be cash form or purchased current asset or purchased any fixed asset.

Any investor who wants to invest his money in company, he will see the financial position from the balance sheet. Company law has regulation that a company must make balance sheet at the end of accounting period and it must be audited by CA. Balance sheet is also base of making fund flow and cash flow statement which are fundamental tool of management analysis.

Accountant has to make balance sheet after adjusting every transaction which has not been recorded at the end of year. Profit and loss account and profit and loss appropriation account is also necessary for making balance sheet.

We can formulate balance sheet under marshalling rule. In this rule we show balance sheet either in the order of liquidity or in the order of permanency.

Explanation of Balance Sheet

Asset Side of Balance Sheet

1. Fixed Assets

In fixed assets, we show land, building, live stock, furniture, machinery, furniture and equipments etc.

2. Investments

In investment, we write investment in shares, debentures, bonds and currencies etc.

3. Current Assets

In current asset, we show closing stock, debtors, cash, bank, short term investments and outstanding incomes and advance expenses

4. Factitious Assets

In factitious asset we show deferred expenditures and all large amount of expenses which is not written off this year.


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Accounting Education: Balance Sheet
Balance Sheet
Accounting Education
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