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Question
Balance sheet is an Account. Justify.
Solution
Against:
- A balance sheet is not an account, but rather a financial statement.
- A Balance Sheet provides an overview of an organization's financial condition at a specific point in time, including assets, liabilities, and equity.
- Unlike accounts, which record transactions over time and are part of the double-entry bookkeeping system, a Balance Sheet summarizes the balances of multiple ledger accounts to provide a clear picture of what the company owns and owes, as well as its invested capital.
- Thus, it is a statement reflecting the organization's financial stability and structure, rather than an account that records individual transactions.
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RELATED QUESTIONS
What is a Balance Sheet?
It is a financial statement which sets out the assets and liabilities of a trading or non-trading organisation as on a certain date.
______ is not an account but only a statement of assets and liabilities.
The excess of assets over liabilities represents the ______ of the owner.
It helps the investor to know the earning capacity and financial health of the firm.
Mr. Tate's financial position on 1 December, 2018 was as follows:
Stock ₹ 4,460; Debtors ₹ 890; Creditors ₹ 2 400; Cash ₹ 500; and Fixed assets ₹ 3,000.
- Draw up a statement to show his assets, liabilities and capital on 1.12.2018.
- During the month of December, 2018, the following transactions took place; Sold goods for cash ₹ 4.000; sold the balance goods on credit for ₹ 3 000; received ₹ 2 000 from debtors; paid ₹ 900 to creditors; withdrew ₹ 400 for personal use; allowed and accounted a direct payment of ₹ 500 by a debtor to one of the creditors.
Draw up a statement of his financial position at the end of the month of December 2018.
The following trial balance was extracted from the books of A. Harding, as on 31st March, 2019:
| Debit (₹) | Credit (₹) | |
| Capital | 20,100 | |
| Drawings | 1,500 | |
| Cash in Hand and at bank | 1,400 | |
| Petty Cash | 100 | |
| Cash Purchases and Sales | 10,000 | 20,000 |
| Credit Purchases and Sales | 12,000 | 25,000 |
| Returns | 2,000 | 1,000 |
| Discount | 400 | |
| Carriage Inwards | 500 | |
| Salaries | 6,000 | |
| Sundry and Petty Expenses | 1,200 | |
| Opening Stock | 5,000 | |
| Bad Debts | 600 | |
| Rent | 1,500 | |
| Machinery | 36,000 | |
| Furniture | 5,000 | |
| Debtors and Creditors | 5,000 | 10,000 |
| Stationary | 2,500 | |
| Commission | 200 | |
| Bank Loan | 14,400 | |
| 90,700 | 90,700 |
Prepare the complete set of final accounts for Mr. A. Harding, after incorporating the following adjustment:
- Closing stock is ₹ 26,000.
It is not an account but a statement.
______ shows the financial position of the organization.
State any two uses of Balance Sheet.
