What is off Balance Sheet

 Meaning of Off Balance Sheet 

Off Balance sheet means list of assets and liabilities which are not in the balance sheet of company. For showing an asset in balance sheet, we should have right on it or we have invested money in it or we have counted this as our business's financial resource . If there is any asset in which we have no right, it will be the asset of our off balance sheet. For showing any item in liability side, our shareholder or our creditor should have claim, if there is no claim but in future it may have claim, then it will not show in the liability side of balance sheet. That item will show in the liability side of off balance sheet.

One important thing, you should understand that there is big difference of item not in balance sheet and not shown in balance sheet. If we did not show any asset or liability in balance sheet, it may not off balance sheet item. Sometime, we forget or do error for showing assets and liabilities in the balance sheet. For example, due to an error, you pass the entry of purchase of fixed asset as purchase. Due to this, that fixed has not been shown in assets of balance sheet. It is not the item of off balance sheet but it is our mistake. So, remember this.

Proforma of Off Balance Sheet

There is no any legal proforma of off balance sheet. But I collected some assets and liabilities which should be in off balance sheet and investor should take care of these items before taking any big investment decision.

Off Balance Sheet Items

Reasons of Making Off Balance Sheet 

1. Off–balance-sheet is a technique of financial institution which is used to artificially inflate profits and make firms look more financially secure than they actually are. 

2. It is also way to show risk free assets. If we transfer all assets which are risky to other false company's balance sheet and remove these assets from our balance sheet, then our balance sheet will become risk free and will attract more investors.






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Accounting Education: What is off Balance Sheet
What is off Balance Sheet
Accounting Education
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