Preparing the balance sheet
The Balance Sheet is a statement which sets out the Assets and Liabilities as on a certain date. It is prepared with a view to measure the true financial position at a particular point of time. The Balance Sheet has the following form.
The balance sheet shows the assets, liabilities and capital that exist at the date at which it is drawn up. It will includeallthe ledger accounts that have balances on them.
It should be noted that the balance sheet is not an ‘account’. Its name is not the balance sheet ‘account’ and it is not part of the double-entry bookkeeping system. The balance sheet, as its name implies, is a list of all the balances in the ledger accounts.
A Balance Sheet has the following characteristics:
a) It is prepared at a particular date and not for a period.
b) it is prepared only after preparation of the Trading and Profit & Loss A/c. Without
the Profit & Loss A/c it will not give the financial position of the firm adequately.
c ) Capital is equal to the difference of assets and liabilities. Therefore the two sides of the balance sheet must have the same totals otherwise it is an indication of the presence of errors.
d) It is not an account but only a statement of assets and liabilities..
e) The balance sheet shows the financial position of a business at going concern concept.