BALANCE SHEET

Balance Sheet - todaypassion

Format of Balance Sheet is a financial statement reports the firm’s financial position at a point in time. Hence historical in nature. A balance sheet can also be used to assess the firm’s liquidity and solvency conditions and ability to make shareholder distributions. Liquidity is the short-term obligations/liabilities and solvency is the ability to meet long-term obligations.

ELEMENTS OF BALANCE SHEET:

The balance sheet is made up of three elements

  1. ASSETS:

 An asset is a resource controlled as a result of past transactions that are expected to provide future economic benefits.

Assets are of two types

  • Current Assets: These are the assets that can be converted in to cash with in a year or one operating cycle which ever is greater. Current assets reveal details about the operating activities of the firm.

Example: Cash, Marketable securities, Inventory, Account Receivables, Prepaid expenses, etc.,

  • Non current Assets: These assets are opposite to current assets as they are not converted into cash in a year. These assets are used by the firm in long run. These assets gives details about the investing activities of the firm.

Example: Property, Plant&Machinery(PPE), Land, Long term investments etc.,

  1. LIABILITIES:

Obligations are the result of past events and the required outflow of cash.

Liabilities are of two types

  • Current liabilities: Obligations that can be met in a year or one operating cycle which ever is greater.

Example: Accounts payable, Outstanding expenses etc.,

  • Non current liabilities: Opposite of current liabilities and they provide details regarding the financing activities of the firm.

Example: Debentures issued, Bank loan, etc.,

  1. EQUITY:

The owner’s residual interest in assets after deducting the liabilities. It is also called as shareholder’s equity or net assets.

Equity consists of equity share capital, preference share capital, Minority interest or non controlling interest, Retained earnings, Treasury stock, and accumulated other comprehensive income.

Formats of balance sheet presentation:

The balance sheet can be represented in both classifications based and liquidity base.

In a classified balance sheet, all the current and non-current assets and liabilities were distinguished. Whereas in a liquidity balance sheet all the assets and liabilities were mentioned according to liquidity.

FORMAT OF BALANCE SHEET IN HORIZONTAL FORM

BALANCE SHEET OF COMPANY ABC AS ON 31DECEMBER 2020

Equity&LiabilitiesAmountAssetsAmount
EQUITY: Share Capital$50,00,000.00NON CURRENT ASSETS: Plant and Machinery$15,00,000.00
Reserves$36,00,000.00Land$10,00,000.00
NON CURENT LIBILITIES: CURRENT ASSETS: 
Bank Loan$20,00,000.00Accounts Receivables$20,00,000.00
CURRET LIABILITIES:   
Outstanding expenses$1,00,000.00  
    
    
    
  Cash$62,00,000.00
    
Total$1,07,00,000.00 Total$1,07,00,000.00