External Liabilities:

All debts payable by a business to the outsiders (other than

the owner) are called external liabilities e.g. creditors, debentures,
bills payable, bank overdraft, etc. External liabilities are further
divided into two.
Fixed or Long Term Liabilities: The liabilities which are
payable after a long period of time are called fixed or long term
liabilities e.g. debentures, loan on mortgage etc.
Current or Short Term Liabilities: The debts which are
repayable within a short period of time are called current or shortterm liabilities e.g. creditors, bills payable, bank overdraft etc.
Balance sheet: Actual financial position
Liabilities

Amount

Assets

Amount

Bank loan

xxx

Cash in hand

xxx

Bank overdraft

xxx

Cash at bank

xxx

Bills payable

xxx

Fixed deposit at bank

xxx

Sundry creditors

xxx

Investments

xxx

Expenses
outstanding

xxx

Capital

xxx

Sundry debtors

xxx

(-)drawings

xxx

Closing stock

xxx

Net profit

xxx

Stock of stationery

xxx

Furniture

xxx

Plant machinery

xxx

Land and building

xxx

Bills receivable

xxx

XXXX

Motor vehicles

xxx

Prepaid expenses

xxx

Income outstanding

xxx
XXXX