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Balance Sheet

Balance Sheet is a statement showing the financial position of an enterprise at a given date, which exhibits its assets, external liabilities, capital and reserves. It is called a Balance Sheet because it is a sheet of balances of those ledger accounts (i.e., personal accounts, real accounts and fictitious asset accounts) which have not been closed till the preparation of the Trading and Profit and Loss account. The Balance Sheet may be defined as ‘a statement which sets out the assets and liabilities of a firm or an institution as on a certain date’.

Characteristics of Balance Sheet

  • It is prepared on a particular date, so the heading must end with the words “Balance Sheet as on..........”
  • It is true only at a particular point of time
  • Balance Sheet is not an account, it is not prepared based on the principles of debit and credit
  • Balance Sheet is a statement which always tallies because of dual aspect concept
  • Balance Sheet contains only real and personal accounts as nominal accounts are transferred to Trading and Profit and Loss account

Need for Preparation of Balance Sheet

  • To ascertain nature and value of assets
  • To ascertain nature and amount of liabilities
  • To find out financial solvency of the enterprise

Contents of Balance Sheet

On the right hand side of the Balance Sheet, “Assets” will be shown and on the left hand side, “Liabilities” will be shown.



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