Balance sheet is just like two type of personalities of a person. You can not tell the difference after seeing money whether it is asset or liability like who is who if you see double role of me in above my video. But from both double role's behavior, you can compare. You can say that one person in the video is teacher who is teaching with full responsibility and other is student but he is not full responsible. He wants to show himself equal to teacher but he has not good quality of student. He did not stand to study just for 5 minutes and slept in standing position. By making balance sheet, we can compare every money of company. It has also two sides. One is liability and other is asset. Before writing any money in asset side or liability side, we see following things.
1. From where has it come?
- From shareholder, it means, it is liability as share capital fund.
- From Debentures, it means, we took loan and it is also liability as secured loan.
- From unsecured loan, it is also liability in the form of loan without any security.
- Stock money from creditor, we still did not pay supplier and he gave us money in the form of stock, it is also our liability as current liability.
- We use other person's services and still did not pay them, it is our liability as current liability. We say that these are our outstanding expenses.
- We did not provide services to others and get money, it means these are our liabilities in the form of advance income.
- We have some money for paying our liabilities. We can not give it to others. These are our liabilities in the form of reserves, surplus and provisions. For example, we kept some fund for paying income tax of company through e-filling of return. But still these money is in our hand. So, this will be liability in the form of provision for income tax.
All above persons to whom we have to pay money are very sincere like the teacher in the video.
But still we also have to fill our assets. Assets are just like student in the video. A student can not think what can he become and what is his worth in the market but teacher knows who is he and how to develop him? Like this, every asset's value is on the basis of total value of liabilities. In above video, I just show liabilities because all assets will be from it and all assets value are not more than total value of our liabilities. But we have to classify all these assets on the basis of investment of our money.
- If huge money is invested in any asset for long term, it will be our fixed asset.
- If small money is invested in any asset for short term, it will be our current assets.
- We deduct some money from these assets due to dead liabilities. These dead liabilities may be depreciation, bad debt, provision for debtors and provision for discount on debtors.
- Some assets may be in the form of intangible like goodwill and patent.
I think, you understand, "how to make the balance sheet of company?"
Now, you should remember two things:
1st thing : You did not become student like the student in the video. You are the asset of my nation. You have to develop our nation. You should study very sincerely when you teacher teaches you.
2nd thing : You did not misuse of your company assets because every asset's resource is liability. Misuse of any asset means decreasing the goodwill of your company. If you think the about the development of company, you have to use its assets very effectively.