MEANING

Balance Sheet is also known as Position Statement. It is a summary of all the assets and the liabilities of the business concern prepared at the end of the year. It is a part of final accounts. All the nominal accounts i.e. Trading Account and Profit and Loss Account are closed by transferring to the Balance Sheet.

ACCORDING TO ERIC L KOHLER

“A statement of financial position of any economic unit disclosing as at a given moment of time its assets, its liabilities and its ownership equities.”

ACCORDING TO FREEMAN

“A balance sheet is an item-wise list of assets, liabilities and proprietorship of a business at certain date.”

FEATURES OF BALANCE SHEET

NOT AN ACCOUNT, A STATEMENT

It is not an account, it is a statement. It is not prepared in account form and has no Debit or Credit side. All the assets are recorded on the right hand side and all the liabilities are recorded on the left hand side with no use of ‘BY’ and ‘TO’.

RECORDS ONLY ASSETS AND LIABILITIES

It makes a record of assets, liabilities and capital only. All the assets whether they are current or non-current are recorded on the right hand side and all the current or non-current liabilities are recorded on the left hand side.

TIME OF PREPARATION

It is prepared at the end of the financial year as at 31^st March 20__. It makes it a static statement.

STAGE OF PREPARATION

It is prepared after the preparation of Trading Account and Profit and loss Account. The net profit or net loss found out of the profit or loss account is posted on the liabilities side under the head capital.

SHOWS FINANCIAL POSITION OF THE BUSINESS

It shows the financial position of the business. It depicts how much the business owes and business owns.

BASIS OF PREPARATION

Balance Sheet is prepared on the basis of accounting equation which is as follows:

ASSETS= LIABILITIES + CAPITAL

As per this equation, the both sides of the balance sheet must be equal.

MARSHALLING OF BALANCE SHEET

Marshalling means ‘Sequence’. Marshalling of Balance Sheet means the order in which the assets and liabilities will appear in the Balance Sheet. There are two main orders:

• IN THE ORDER OF PERMANENCE
• IN THE ORDER OF LIQUIDITY

IN THE ORDER OF PERMANENCE

As per this order, the fixed assets are recorded firstly and then current assets are recorded. On the liabilities side, the capital is recorded first and non-current liabilities and current liabilities are then recorded respectively.

The format of Balance sheet in order of permanence is as follows:

IN ORDER OF LIQUIDITY

As per this order, the current assets are recorded firstly and then fixed assets are recorded. On the liabilities side, the current liabilities are recorded first and non-current liabilities and capital are then recorded respectively.

The format of Balance sheet in order of liquidity is as follows:

Also Study	Also Study	Also Study	Also Study
Accounting	Non profit organisation	Depreciation	Liquidity ratios
Nature of Accounting	Receipts and Payments Account	Depreciation Accounting	Acid Test Ratio
Benefits of Accounting	Scope of accounting	Hire Purchase Accounting	Cash Ratio
Difference between cost accounting and financial accounting	Financial accounting, cost accounting and management accounting	Difference between hire purchase and instalment system	Financial ratio analysis
Difference between transaction and event	Transactions	Users of Accounting	Ratio analysis
Limitation of Accounting	Capital Expenditure	Instalment System	Difference between consignment and sale
Book Keeping	Revenue Expenditure	Reserves Accounting	Abnormal loss vs normal loss in consignment
Accountancy	Difference between capital and revenue expenditure	Provisions	Treatment of loss on consignment
Accounting as science or an art	Accounting Equation	Single entry system	Accounting treatment of consignment
Book Keeping vs accounting	Deferred Revenue Expenditure	Difference between statement of affairs and balance sheet	Joint venture vs consignment
Book keeping vs accountancy	Capital receipt	IFRS	Departmental Accounting
Accounting vs accountancy	Revenue receipt	Balance Sheet	Methods of departmental accounting
Basis of Accounting	Difference between capital and revenue receipt	Profit and loss Account	Allocation of expenses in departmental accounting
Branches of accounting	Difference between accounting concepts and conventions	Trading Account	Inter-departmental transfers
Cash and mercantile system of accounting	Accounting Standards	Voyage Account	Different types of branches
Accounting Principles	Objectives of Accounting	Accounting for Incomplete Voyage	Departmental vs Branch accounting
Golden ru les of accounting	Process of Accounting	Joint venture	Methods of branch accounting
Double entry system of book keeping	Scope of Accounting	Joint Venture Vs Partnership	Incorporation of branch trial balance
Double entry vs Single entry system	Accounting Concepts vs Accounting conventions	Methods of recording transactions in Joint Venture	Garner VS Murray Rule
History of Accounting	Difference between provisions and reserves	Consignment