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Questions
What are the features of a Balance Sheet?
Explain the features of Balance Sheet.
List any two/three features of a Balance Sheet.
State the main features of a Balance Sheet.
Solution
The features of a Balance sheet are as follows:
- A balance sheet is prepared for a certain date rather than a specific time.
- It shows the kind and worth of liabilities and assets as well as the capital position on a specific date.
- It is not an account under the double entry system - it is a statement only.
- It is prepared following the creation of the Trading and Profit & Loss Account or the Income and Expenditure Account.
- It can be prepared, taking into consideration the debit and credit balances of the real and personal accounts, as her trial balance, wherein the real account's debit balance is an indicator of the asset of a firm, while the credit balance of the personal account is an indicator of liability.
- The equation Assets = Liabilities + Capital must equal the sum of the two sides of the balance sheet, or the assets and liabilities. If not, something is obviously wrong.
- It makes the company's solvency and financial situation public.
Notes
Students should refer to the answer according to their questions.
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RELATED QUESTIONS
What is a Balance Sheet?
Write any two uses of the Balance Sheet?
A ______ is a statement of assets and liabilities at the end of the period. It shows the financial position of a business on a certain date and represents the third and final stage.
It is a financial statement which sets out the assets and liabilities of a trading or non-trading organisation as on a certain date.
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.
Why is a Balance Sheet prepared?
Distinguish between a Profit and Loss Account and a Balance Sheet.
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 a statement of assets and liabilities. It is prepared to judge the financial position on a particular date.
The main use(s) of a Balance Sheet for a non-trading organisation is/are ______.
It is always prepared on a particular date.
______ shows the financial position of the organization.
All membership fees collected by a non-trading concern must be entered in the assets side of the balance sheet. Justify for or against.
State any two uses of Balance Sheet.
Balance sheet is an Account. Justify.
