Interesting Facts of Balance Sheet

Some facts are mentioned on the basis of ONGC's Balance Sheet
If you do deep analysis of balance sheet of company, you may find many interesting facts of balance sheet. Following are main interesting facts of balance sheet.

1. Do you know that balance sheet is single source of finding owner's net worth. Suppose, A company is facing losses from his business. He sells his business to company B. The company B who buys the A company's business makes balance sheet of his business. Company B finds that after deducting assets at its market value from liabilities, A company has just $ 100 net worth. So, company B pays all A company's external  liabilities and takes over all his assets. Now, company has to return the share capital of  A company. Because now it is $ 100. Suppose, there are 50 shareholders of company A. Company B will pay only $ 2 per shareholder if all shareholders invest  equal amount in company

2. Excess of total liabilities over total assets is called Goodwill. Some business may run on goodwill. This goodwill should be shown in the balance sheet. This is the asset of business. Some company amalgamates or merges other company only after seeing the Goodwill value in other company's balance sheet. After amalgamation, other company's goodwill will become our company's goodwill on consolidation. This is also plus sign of our company's assets.

3. You may have notes that deferred tax liability is shown in liability side of balance sheet of company. Deferred tax liability is difference of tax calculated for accounting purpose and for tax purpose. It means that company has to pay this amount to Govt. But this fact indicates company is showing more the depreciation as expenses in profit and loss account than what depreciation is allowed by Tax department or company is not paying tax on the time due to shortage of cash. ONGC's balance sheet on 31st march 2011 is showing RS. 11,152 Crores deferred tax liability. However it is Govt. Company and one of highest profit earning company. You feel also wonder that deferred tax may be the asset of company if company has more paid tax than what is actual liability of tax.

4. If you make balance sheet in vertical format, you can find working capital. This is the excess of current assets over current liabilities and it is very useful tool to analyze the financial health of company.  

5. One of interesting  fact of balance sheet that miscellaneous expenditure is an asset in balance sheet but there is zero value of it in the market. Actually it is the decrease of capital due to preliminary expenditures. If we deduct miscellaneous expenditures from reserves and surplus, there will be same effect on balance sheet as it is shown as asset in the balance sheet.

Related : How to Make Balance Sheet of Company






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Accounting Education: Interesting Facts of Balance Sheet
Interesting Facts of Balance Sheet
Accounting Education
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