5 Simple Steps to Preparation of Balance Sheet

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Preparation Trial Balance

Preparation Income Statement

Preparation of Balance Sheet

What is Balance Sheet?

A balance sheet is a financial statement that reports a company's assets, liabilities and shareholders' equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure.

It is a financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders.

Basic Documents

For preparation of balance sheet

Debtors List
Creditors List
Loans Details
Bank Statement
Various Ledger
Fixed Assets

For Preparation of Income Statement

Credit note
Debit note
Sale Register
Purchase Register
Expense Register
Other Income Ledger

999

Basic

All Inclusive Fees

Less than total income 10 Lakh

1999

Silver

All Inclusive Fees

Less than total income 20 Lakh

2999

Gold

All Inclusive Fees

Up to total income 30 Lakh

Basic Features

Knowledge of financial position

Balance sheet depicts the true financial position of the business. The position can be ascertained by a study of the Balance sheet. We can calculate short term and long term financial ratios, proprietary and other ratios to have the knowledge of the financial soundness of the business.

Balance Sheet is a Statement

Though the Balance sheet is an integral part of the double entry system, it is not an account. It has got the balance of certain ledger accounts. The balances of all ledger accounts are not shown in it.

Prepared on a specified date

Balance Sheet is prepared on a specific date, i.e., at the end of the accounting period. It is common practice and also a legal requirement to prepare Balance. Sheet together with Trading and profit and loss account at the end of the accounting year. It may be prepared after every six months if the proprietors so desire.

Statement of Assets & Liabilities

The left-hand side is a liability representing credit balance. The right-hand side is assets representing debit balances. Provisions are also shown on the liabilities side. Proprietors capital or share capital is also showing at liabilities side.

Know the Position of Business

You may turn to either your balance sheet or profit and loss statement to understand how your business is doing financially. While your profit and loss statement can quickly show your expenses versus your income, it doesn’t show your current assets and pending liabilities as a balance sheet does.

Play an Important role for owner

The balance sheet provides a snapshot of a company's accounts at a given point in time. The balance sheet, along with the income and cash flow statement, is an important tool for owners but also for investors because it is used to gain insight into a company and its financial operations