Professional Documents
Culture Documents
ASSETS SIDE
1.Fixed Assets : These are assets which are meant for use in business and not for sale. These assets
provide a long term economic benefit, usually for more than one year to the firm. These include
goodwill, land, buildings, leaseholds, plant and machinery, railway sidings, furniture and fittings,
patents, livestock, vehicles, etc. These assets are shown at cost less depreciation till the date.
2 Investments: Business is supposed to great profit. When generated, this profit in excess of what
is required for the business can be invested into say, shares or debentures of various companies.
Investments thus represent assets held by an enterprise for earning income. Under this head,
various investments made such as investment in government securities or trust securities;
investment in shares, debentures, and bonds of other companies, immovable properties, etc., are
shown.
3.Current Assets, Loans and Advances : One the fixed assets are in a state of readiness to produce
or provide goods and services, the company needs current assets to carry out business operations.
These assets are held for consumption of for sale and are expected to be realized in cash during the
normal operating cycle. Current assets include inventories, debtors, cash etc. Loans and advances
refer to those assets which are held for a short term and are expected to be realized within one
year. These include advance payments, loans to subsidiary companies etc. Both the sub headings-
current assets as well as loans and advances must be shown separately under two sub-heads- (a)
Current Assets (b) Loans and Advances. It includes interest accrued on investment, inventories,
sundry debtors, bills receivable, cash and bank balances while loans and advances and other
advances like prepaid expenses, etc.
4. Miscellaneous Expenditure: The expenditure which has not been fully written off shown under
this heading. It includes preliminary expenses, advertisement expenditure, discount on issue of
shares and debentures, share issue expenses, etc.
5. Profit and Loss Account: When the Profit and Loss account shows a debit balance, i.e., loss
which could not be adjusted against general reserves, is shown on the asset side of the Balance
Sheet.
01.04 All the monetary transactions relating to the business have impact on financial
statements.
01.05 Simple points to identify the impact of the transactions **
↑ Asset = Dr; ↓ Liability = Dr; ↑ Expenses = Dr
↓ Asset = Cr; ↑ Liability = Cr; ↓ Expenses = Cr