What is Balance Sheet? Balance Sheet is part of final accounts, prepared by a business firm to know its financial position on a particular date for a particular period. Balance sheet shows the total liabilities and total assets of a business firm on a particular date.

Who prepares Balance Sheet? Balance sheet is prepared by all business and professional firms.

What are the benefits of preparation of Balance Sheet?

  1. With the help of balance sheet total liabilities and assets can be seen at a glance.
  2. A business firms can take so many decision in respect of idol money lying with the firm.
  3. It is mandatory for all listed companies to submit the balance sheet with stock exchange, registrar of companies and to send the copy of final accounts to each and shareholder.
  4. In partnership firms, the contribution of the partners can be ascertained.
  5. To get loan from banks, other financial institutions or from public it is compulsory to prepare balance sheet so that the lender of money can assess the financial condition of the business firm.
  6. At last from the point of accounts, unless the balance sheet is prepared, how the opening balances of accounts will be taken in next financial year? Therefore, it is must to prepare balance sheet.
  7. Other than above, there may be so many reason because of those the balance sheet is required.

When a Balance Sheet is Prepared? It can be prepared by a business firm on any particular date. It can be prepared on monthly basis or quarterly basis or half yearly basis or yearly basis according to its requirement. For example all the companies registered with stock exchanges furnish monthly details relating to sale, profits, liabilities and assets of listed companies. Therefore, these companies have to prepare the Trading account, Profit and Loss Account and Balance Sheet on monthly basis. But if we talk in general then it is prepared at the end of the financial year.

Contents of Balance Sheet:- A Balance Sheet shows the following details:-

  • Details of all assets
  • Details of all liabilities
  • Net Profit or Net Loss

How a Balance Sheet is prepared? Balance Sheet is prepared with the help of Trial Balance. Balance sheet is divided in two parts i.e. Liabilities  and Assets.

In Liabilities, we show the following details:-

In Assets, we show the following accounts:-

 Example of Balance Sheet

From the following trial balance we have to prepare Balance Sheet

Note:-  As you know that balance sheet can not be prepared unless the Trading Account and Profit and Loss Accounts are prepared. Therefore, I am taking same example which is already shown in my other term “How to Prepare Trading Account” and “How to Prepare Profit and Loss Account”. The same can be helpful for the learners to understand it in a better way through same example.

 TRIAL BALANCE OF M/S ABC ENTERPRISES AS ON 31.03.2016

PARTICULARS AMOUNT AMOUNT
DR. CR.
OPENING STOCK OF GOODS

250000

PURCHASES

500000

SALES

900000

FUEL EXPENSES FOR MACHINERY

50000

ELECTRICITY EXPENSES – FACTORY

60000

ELECTRICITY EXPENSES – OFFICE

10000

WAGES TO WORKERS

100000

SALARIES

30000

PACKING CHARGES

5000

TELEPHONE EXPENSES

3000

PRINTING & STATIONERY EXPENSES

2000

BANK OF INDIA

15000

CASH IN HAND

12000

SUNDRY DEBTORS

40000

SUNDRY CREDITORS

77000

MACHINERY A/C

30000

CRATGE & FREIGHT EXP.

6000

BANK CHARGES

500

BANK INTEREST

12500

ADVERTISEMENT EXP.

10000

SALES PROMOTION EXP.

15000

CONVEYANCE EXP.

12000

VEHICLE MAINTENANCE EXP.

30000

CAPITAL A/C

216000

 TOTAL

1193000

1193000

CLOSING STOCK AS ON 31.03.12 WAS RS. 224000/=

M/S ABC ENTERPRISES

TRADING A/C AS ON 31.03.2016

INCOME AMOUNT CR.
SALES

900000

CLOSING STOCK

224000

TOTAL

1124000

OPENING STOCK

250000

PURCHASES

500000

FUEL EXPENSES FOR MACHINERY

50000

ELECTRICITY EXP. – FACTORY

60000

WAGES TO WORKER

100000

PACKING CHARGES

5000

CARTAGE & FREIGHT EXP.

6000

GROSS PROFIT

153000

TOTAL

1124000

 

 

M/S ABC ENTERPRISES

   

PROFIT AND LOSS ACCOUNT AS ON 31.03.16

INCOME

AMOUNT CR.

GROSS PROFIT

153000

TOTAL

153000

EXPENDITURE

AMOUNT DR.

ELECTRICITY EXPENSES – OFFICE

10000

SALARIES

30000

TELEPHONE EXPENSES

3000

PRINTING & STATIONERY EXPENSES

2000

BANK CHARGES

500

BANK INTEREST

12500

ADVERTISEMENT EXPENSES

10000

SALES PROMOTION EXPENSES

15000

CONVEYANCE EXPENSES

12000

VEHICLE MAINTENANCE EXPENSES

30000

NET PROFIT

28000

TOTAL

153000

 

 

M/S ABC ENTERPRISES

BALANCE SHEET AS ON 31.03.16

LIABILITIES

AMOUNT

CAPITAL                          

216000

ADD: NET PROFIT AS PER P&L A/C

28000

244000

SECURED LOANS

0

UNSECURED LOANS

0

CURRENT LIABILITIES
SUNDRY CREDITORS SEE ANNEXURE-A

77000

PROVISIONS

0

TOTAL

321000

ASSETS

AMOUNT

FIXED ASSETS
MACHINERY

30000

INVESTMENTS

0

CURRENT ASSETS
 
CASH IN HAND

12000

BALANCE WITH BANK OF INDIA

15000

CLOSING STOCK

224000

SUNDRY DEBTORS SEE ANNEXURE-B

40000

LOANS & ADVANCES (ASSETS)

0

TOTAL

321000

ANNEXURE – A

DETAILS OF SUNDRY CREDITORS AS ON 31.03.2016

MORNING PLACE

22000

GIFT HOUSE

35000

SUPPLE RUBBERS

10000

TOTAL

67000

ANNEXURE – B

DETAILS OF SUNDRY DEBTORS AS ON 31.03.2016

MASCOT MARKETING

24000

MAGNA IMPEX

6000

GLOBAL ENTERPRISES

10000

TOTAL

40000

 

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