How to prepare balance sheet

Learn Accounts Accounts Learning Portal MENU Home > Basic Accounting > HOW TO PREPARE BALANCE SHEET HOW TO PREPARE BALANCE SHEET Posted By G.S. Bansal, On July 22, 2012 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? With the help of balance sheet total liabilities and assets can be seen at a glance. A business firms can take so many decision in respect of idol money lying with the firm. 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. In partnership firms, the contribution of the partners can be ascertained. 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. 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. 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:- Capital Secured Loans Unsecured Loans Current Liabilities and Provisions Profit and Loss Account (Balance of Profit) In Assets, we show the following accounts:- Fixed Assets Investments Current Assets, Loans and Advances Miscellaneous Expenditure Profit and Loss Account (Balance of losses) 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 RELATED TERMS: Learn Accounting, Free Accounting Tips General Accounting Terms General Tips Relating to Indian Income Tax Act Free Tally Learning General Tips Relating to Sales Tax-VAT Tags: HOW TO PREPARE PROFIT AND LOSS ACCOUNT, HOW TO PREPARE TRADING ACCOUNT, HOW TO PREPARE TRIAL BALANCE HOW TO PREPARE PROFIT AND LOSS ACCOUNT → ← INCOME TAX RATES FOR FINANCIAL YEAR 2011-12 Leave a Reply Your email address will not be published. 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