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Covid19 pandemic disease which had restricted movement of people all around world has given rise to various side effects. Many business activities depended upon movement of people. Example : logistics, Hotel & Tourism Industry. These had got big hit because of Covid. Every Industry has inter depend on each other. Nobody is free from COVID19 effect.

Every economical effect has effect on Psychology. It creates fear in the minds. Fear of uncertainty affects future activities of a person & family. Many unexpected decisions were done by many people in fear. Even rich film stars, Industrialists took extreme steps in life rather facing the life with spirit. Every hurdle in life is meant to purify and bring new change.

This article is trying to address the above fear with tool of ' Balance Sheet Healing '. It is trying to link Healing process by way of Compliance, books of records & ITR to face uncertainty of life. COVID19 is most unexpected event that nobody had prepared & experienced in last 100 years or so. Hoping 'Balance Sheet Healing ' will reduce your fear and give the confidence on future and sustainability.

The word ' HEALING' means - To make healthy, whole, or sound; restore to health; free from ailment. To bring to an end or conclusion. Balance Sheet Healing Denotes to Make Balance sheet true and correct which reflects your finance health strong and restore.

Compliance is basic pillar of Balance Sheet Healing ( hereinafter called as BCH ). Without compliance of laws, BCH cannot be done. Compliance of Laws includes following spirit of law while making transactions with others, Maintaining records, Using Banking Channel & reporting to respective authorities with true and correct manner. Compliance of law includes submission of records to department & responding to the notices within time.

Without Compliance, Risk & fear cannot be reduced to anybody at the time of crisis. Fear will get multiplied to people in the crisis when they were habitual offenders of laws & rules. These offenders were Heroes when everything is running smooth. But they get disturbed when crisis happens. So I strongly recommend Compliances as BASIC & FOREMOST before going for BALANCE SHEET HEALING.

Balance Sheet Healing - New Accounting Yoga Practice to Heal

Balance Sheet:

Even though it is commerce Word. it is usual document that one will give while taking Loan from Banks. Balance Sheet (Hereinafter called as 'BS') means a statement of the assets, liabilities, and capital at a particular point in time, detailing the balance of income and expenditure over the preceding period. It means BS can be prepared at any time. BS is good to prepare whenever you like to see Assets & Liabilities, Capital of your own

Now let us go into detail on what is asset, what is liability for a person. Redefine Capital. These need to be looked into as a common person.

Asset - An item which Bring Cash to you. It includes Cash & Bank Balance. Eg: If you have mobile, it is an asset as it brings cash if you sell that. An Asset includes a property bought on loan

Liability - An item which ask you to pay Cash to others in future days. This includes Housing Loan & Gold loan. Even Personal Hand Loan is part of this as liability

Capital - Net of Total Assets Value minus Liability. Capital = Total Assets Minus Liability value.

One may be rich & having huge assets, He may not have capital. It means he is not in good position

People must prepare their BS every year as on 31st March to get good hand their financial position. This exercise is very important to gather all info and documents of whole year which are in different areas & yet to collect. This BS exercise will make a person to collect and store documents. Documents includes - Bank statements of whole year, Invt proof, Form 16, FD receipts, College Fee receipts & others. FORMAT OF BS LOOKS AS BELOW IN SIMPLE FORM


















































Income Tax





Personal Expenses



Rental income


Medical Expenses



Interest income


Other Regular Expenses



Other incomes



Net profit/Surplus for the year







BS is Horoscope of One's financial condition. That is reason why Govt or anyone asks for BS whether while giving notice or finding sources of assets. There are if and buts for preparation of BS for business entity purpose or commercial purpose. Many standards & rules will apply

However for personal purpose, It is clarity and certainty is important. One can draw his BS if he has little knowledge on accounts, finance & mathematics. This is for personal purpose

Value of Assets in the BS must reflect actual money spend as per records. Loans & advances must be as on actual payable or receivable as on particular point of time. Bank Balance is as per Bank statement as on that date. This includes Fixed Deposit & RD.

7 Easy Steps for Balance Sheet Preparation

1. Collect All Bank statements for the year till date of Balance Sheet. Eg : If you want to have BS as on 18th June 2020. Collect statements till 18th June 2020.
2. Collect all Investments in LIC/PPF/Other securities/FD/RD till date of BS
3. Collect the Loan Statements till BS Date
4. Assemble all property Details
5. Assemble or Recollect information on Hand loan or Deposits
6. Open an Excel and format BS as above, Enter values against each particulars
7. Capital Account is residual Value of Assets minus liabilities. Total of Assets = Total Liabilities

Traditional Usage of BS

1. BS is main document to track the sources of funds by IT department. By knowing your assets, IT dept will calculate your undeclared Income.
2. BS is main document for Banks before lending. BS serve as Litmus test to know your capacity to repay

Accounting Ratio

A ratio compares two values. It indicates how many times one number contains another. Bankers looks for Current Ratio, NP ratio, GP ratio to know strength of a BS & analyze one's capacity

Balance Sheet Healing (BCH) - After knowing basic terminology of BS, It is now time to look to BCH in detail. No one has used this expressly till date. You can browse in Google and find out meaning of Balance Sheet Healing.

It is healing method by looking into our BS. Using BS to heal our tensions and give comforts. Few methods or steps to do

1. Analyse and Recollect: Analyzing the assets and liabilities at particular time. Every Asset has emotions and history. Each asset has some efforts & cost while acquiring. If you spend 3 minutes in each asset & re collect story of success. It heals more than any other devotional book. Every Investment in FD & securities brings our hope and aspirations. Investment in PPF, PF & Balance in those accounts gives us comfort life after retirement. This helps us to live till particular to enjoy the benefit.

Every Loan & its Balance amount to pay remind us responsibility that clear the same with available resources. It asks for additional effort to clear the same.

2. Auditing Property & investment Documents: Audit means examination with an object. Here object is to check documents are clear and correct. Also have an object that each document are easily available and have a particular place to store and keep. Ancient Will or ancestor property documents remind us that our ancestors gave us lot to become comfort in life with available resources and skill. This also gives a check point that we need to make same and more comfort to our next generation . Document includes your LIC documents, Bank statements & job offer letters etc. Document verification helps to see & read clauses which we never read. If you find any confusion & needs clarification. Sometimes we start collecting the documents which was given to others

If possible, its good if you can have all documents in soft copy year wise. Let your dependents and spouse know all these.

3. Ratio usage:  Apart from usage current ratio, Quick ratio & NP ratio which are required by financiers for giving loan, I like to introduce 2 more ratio

a) Sustainability Ratio: This ratio is used when you are in era of uncertainty of Income or job loss. This ratio will give ready made answer of sustainability and avoids panic. This is not their any accounting books. But invented myself to give real benefit the benefit

When COVID19 was happened, I asked my commerce people including my CA internship students with 1 question - What is use of Balance Sheet & Income Sheet? How can we people with accouting tools to give confidence in the covid situation. If Accounts & ITR is not useful in this situation, then there is no meaning of maintaining discipline & accountability in life.

After 1 month rigorous & in detail study, I found that current ratio are not useful when crisis arises. Even those are useful to stake holders like banks, rather owner himself. So sustainability ratio gave birth after this.

Sustainability is not new all together. But it is fixing thoughts and emotions in numbers.

Sustainability Ratio (SR) = Net Assets which are available for immediate use(NA)/( Expenses for Maintaining present living standard (EM) +EMI COMPONENT)

Here Assets which are available for immediate use : Bank Balance ( Saving Bank +Fixed Deposit ( excluding Tax Saving Deposits maturing after 1 year or more)+ Cash Balance + Handloan which give to others

Net Assets means (NM) = Assets as above minus immediate payables and hand loan repayment

EM = Expenses like Rent, Schooling, utility bills, Food Expenses of present standard. Here Income tax is not considered because we assume Job loss. When Job loss, then no question of Income Tax.

EMI - Housing Loan EMI for one year.

If SR = NA/(EM+EMI) =is more that 1.5 times , then it means you can have comfort life for 1.5 years without Income.

It is good if you can have SR as 2.6 times, you will have comfort level

Why 2.6 times = Any change in environment which affects current job, nearly 2.5 years is need to get equip with new qualification or new technology. One must need to spend 8000 hours to become expert in any subject and make marketable himself

0.5 times = Dangerous Level. This call for change of location of your residence to reduce your cost of living. 6 months is needed to get settle in another place

Thumb Rule: Try to maintain SR level at all time 2.6 or more. More than 2.6 times, you can use it for converting into fixed assets of your choice or convert into retirement benefit scheme

b) Effective Capital of an Individual (ECI) Ratio = This is to check real assets worth of a person. NO need to get panic when no income because of any reason. Change of job or Job loss make a person to get into psychological defeating environment. We seen people become mental distress when present condition of job change or job increment do not come as per plan. Remember that Life is more important than career. You are biggest assets to your family.

Effective Capital means - Money in hand after selling all your assets minus paying off all your liabilities. Here Going Concern is not assumed. It presumed that Every assets need to be sold for money immediately to clear all dues

ECI is best exercise to do get confidence in you & increasing this every year is your real performance.

However ECI do not recognizes imaginary or hype rates for your immoveable properties. Government Guidelines value minus Capital Gain Tax is real one. Usually Property Rate get increase by 12% as post Tax unless it is rural area property. Conservative approach in the valuation helps to arrive real numbers.

Under ECI, it is assumed that you are going to clear all your Housing loan & other hand loans with Interest till date. ECI never recognizes any mercy or discount in payment of loans and liability. This includes your credit card outstanding too

ECI is way of arriving one's real assets worth. ECI is one which you are going to transfer it to next generation. ECI includes your LIC term plan amount +PPF +Other retirement benefits.

ECI Ratio = Effective Capital ( ECI )/Present living Expenses ( PLE)
PLE = (Rent + Education + Food + Medicine Expenses per month Conveyance Expenses)*12 months
ECI = 10 times is Good one

Eg: if your Yearly Expenses or PLE is Rs 8 lakh. Then ECI more than Rs 80 lakh is good.

Why ECI?

Because of various reason, we start investing in real estate properties or investing in shares or venturing in new business without making real assessment using Bank loan or 3rd Party Handloan. This type of decision creates unnecessary tension in the minds if COVID kind of uncertainty comes all of sudden. ECI helps you to decide what is real worth of your asset. One must try to increase ECI by making real increase in assets rather inflation in black money market.

Eg: Mr Siddhartha ( Coffee Day Owner) was owner of Rs 8000 crores of assets. However he was panic & took wrong decision as he did not arrive his ECI at that time. He was expected to pay IT due of few hundred crore. Since he failed to see his ECI, he took wrong decision

ECI helps you to become confident about you & gives no obligation mentality. As CA, I always want every person to have ECI of 7 times of ones' present life standard Expenses per year to become secure. You can increase your assets or reduce your living expenses by proper planning


Balance Sheet Healing (BCH) is out of box thinking concept. It asks & requires each person to have clear & transparent financial transaction. It looks to help people beyond for Tax compliance. BCH surely helps to get confidence and assess himself with his own records and information. I am firm believer that Accounting is REAL APPLIED SCIENCE Than Chemistry and Physics. Better accounting & transparency in life reduces nearly 40 to 50% unwanted risk in life. It stops hasty decisions. It brings new personality of Self sustainability & facing challenges in life. Sustainability Ratio & ECI ratio is need of hour for people who feels uncertainty in job. These two ratio are helpful for Salaried class to know real progress in their life. Fat Balance Sheet do not give confidence when you have huge value of immoveable property in assets side as well as huge bank loan in liability side

BCH is easy in its conception, but unfortunately complicated in its execution. BCH is new Accounting YOGA for people to get Good financial Health. One must do regularly & practice it to get more benefit.


Published by

CA. Chikkerur C R
Category Accounts   Report

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