Balance sheet is a statement which showsassets and liabilities of the business rm on a particular

date.Balance sheet is not an account, it is only a statement. At the end of the year, the balances of
all accounts relating to income and expenditures are transferred toprot and loss accountand the
balances of remaining accounts are shown in the balance sheet. The balances shown in balance
sheet are shown as opening balances in nextnancial year.
Balance sheet is prepared annually or at the end of the nancial year. In India, nancial year is from
1stApril to 31stMarch.
In India there are two formats of preparing of the balance sheet:1) Horizontal format:-In horizontal format of balance sheet, the gures are shown in two parts
of balance sheet as under:Liabilities.
Assets.
2) Vertical format:-In vertical format of balance sheet the gures are shown in two parts of
balance sheet as under:Sources of Funds:-All the liabilities are shown under this head.
Application of Funds:-All the assets are shown under this head.
In both formats, the dierence is only the presentation. The gures and accounts heads are not
aected at all.
CONTENT OF BALANCE SHEET
Following items are shown in balance sheet:LIABILITIES
1.CAPITAL(Owners Equity)
The structure of Capital or owners equity diers according to the dierent type of business
organizations. For example:In Limited Companies, the capital is shown asshare capital. Again, Share capital shows separate
details of equitysharesandpreference shares.
In Partnership Firm, the capital is shown as Partners Capital.
In Proprietorship Firm, the capital is shown as Proprietors Capital account.
2.RESERVES AND SURPLUSES

Reserve and surplus is shown in the balance sheet of limited companies only. This is the part of
shareholders fund. Reserve and surplus is again divided in following parts:Capital Reserves
Capital Redemption Reserves
Share Premium Accountor Securities Premium Account
General Reserves (Reserves for any specic reasons etc.)
Surplus (Balance in prot and loss account after providing for proposed allocations, namely,
dividend, bonus or reserves
Sinking Fund
3.SECURED LOANS
Secured loans are those loans which are accepted by the business rm against any specic or rolling
assets of thecompany. We can classify the secured loans as follow:Debentures
Loans from banks
Loans subsidiaries
Other loans
Interest accruedand due on secured loans
4.UNSECURED LOANS
Unsecured loans are those loans which are accepted by the business rms without any charge or
mortgage. For example:Fixed deposits
Loans from subsidiaries
Short term loans
From banks
Fromothers
5.CURRENT LIABILITIES&PROVISIONS
A)CURRENT LIABILITIES
Current liabilities are those liabilities which are normally settled within one year. We call them as
rolling liabilities also. Current liabilities include the followings:Bills payable
Sundry creditors
Bank overdraft
Cash credit facilities
Subsidiaries Companies
Credit balances of debtors.
Outstanding expenses or Expenses payable

Unclaimed dividends
Other liabilities (if any)
Interest accrued but not due on loans
B).PROVISIONS
Provision means when any amount is kept separate for certain purpose and also debited in prot
and loss account but not paid in current nancial year. For example:Provision for taxation
Proposed dividend
For contingencies
For provident fund scheme, pension and similar sta benet scheme
Other provisions.
ASSETS
1.FIXED ASSETS
These assets are also called long term assets. Fixed assets are shown in balance sheet at their
historical cost lessdepreciation. The depreciation rates are determined inincome taxrules or
companies act. Following are the examples of xed assets:Goodwill
Land
Building
Leaseholds
Railway sidings
Plant and machinery
Furniture and ttings
Development of property
Patents, trade marks and design
Livestock
Vehicles
2.INVESTMENTS
When any business rm invests some money other than its business activities then it will treated as
investments. Normally, the investment is made in marketable securities or bonds or mutual funds or
debentures etc.
3.CURRENT ASSETS,LOANS AND ADVANCES
A).CURRENT ASSETS
Current assets are those assets which are mostly settled within a year and according to business
trade the net amount of these assets keeps changing on through out the year. For example:-

Sundry debtors
Bills receivables
Closing Stock
Interest accrued on investments
Cash balance on hand
Bank balances
Security Deposits
Fixed Deposits with banks
B).LOANS AND ADVANCES
When the loans are given or the amount is paid in advance, by a business rm, shall come under
this category.
Advances and loans to subsidiaries
Advances and loans to partnership rm in which the company or any of its subsidiaries is a
partner
Taxes paid in advance
Advances paid to suppliers.
Prepaid Expenses
4. MISCELLANEOUS EXPENDITURE
These are basically,revenue expendituresbut these expenditures are written o in more than two
years because the eect of these expenditures is seen in more than one years. These expenditures
are also called asdeferred revenue expenditures. Following are the examples of these
expenditures:Preliminary expenses
Expenses including commission or brokerage on underwriting or subscription of shares or
debentures
Discount allowed on the issue of shares or debentures
Interest paid out of capital during construction (also stating the rate of interest)
Development expenditure not adjusted
Other sums (Specifying nature)
5. PROFIT AND LOSS ACCOUNT
This is shown only when its debit balance could not be written o out of uncommitted reserves.