You should remember balance sheet and its all components thoroughly. It can be made either horizontal or vertical form. But total of assets should be equal to total of liabilities. Here, I am explaining these components.
Assets Side of Balance Sheet
Assets are written in right side of company’s balance sheet. In these assets, we include.
1.
1. Fixed Assets
We will show all fixed assets which are purchased and used in business. This is the long term expenditure of company. In these assets, we will include following.
I) Land
II) Building
III) Plant and Machinery
IV) Furniture and Fixture
V) Leasehold assets
VI) Development of property
VII) Vehicles
VIII) Live stocks
IX) Railway sidings
X) Equipments
We also include intangible assets in fixed assets head. Following are the main examples of intangible assets.
I) Goodwill
II) Patents
III) Trade marks and design
Depreciation is charged on every fixed asset except land, because value of land will increase after some time. Here, students are given advice that they should calculate the value of net fixed assets, if different fixed assets are purchased or sold during the year. The following table will be the part of working note.
Investment is outflow of fund for getting interest or dividend earning. So, it is the asset of company and will include in assets side. The following are the main investments.
a) Investment in Government or trust securities.
b) Investment in Shares, debentures or bonds
The following points must be kept in mind while you are showing investment in balance sheet.
i) Investment in fully paid up shares must be shown separately from investment in partly paid up shares.
ii) Investment in the form of shares in subsidiary company must be shown separately from investment in any other company.
c) Investment in immovable properties.
d) Investment in the capital of partnership firms.
Investment will be shown on cost or market value which is less.
3. Treatment of current assets , loan and advances in balance sheet
A) Current assets
Current assets will be shown in separate head and following components will be included in it.
i) Stock in trade
ii) Work in progress
iii) Stock of stationary
iv) Stock of loose tools
v) Stock of stores and spare parts
viii) Bank balance
a) With schedule bank
b) With other banks
B) Loan and Advances
The amount which is given by company to others in the form of loan or advances will be shown in asset side. Followings are its main examples.
a) Advance and loan to subsidiary company
b) Advance and loan to partnership firm
c) Bill of exchange / Bill receivables
d) Advance expenses paid
e) Outside incomes.
4. Miscellaneous expenditures
Expenses which are not written off will be shown in asset side of balance sheet. There is no market value of these expenses. Examples are given below.
i) Preliminary expenses
ii) Commission or brokerage of subscripttion of shares ordebentures
iii) Discount allowed on issue or shares and debentures
iv) Interest paid out of capital during construction
v) Development expenditure
5. Profit and Loss Account
If company suffers net loss after adjusting all reserves, then it will be shown in asset side. This amount can be also deducted from reserves in liabilities side. That time, we will not show it in asset side.
Liabilities Side of Balance Sheet
Liabilities are written in left side of company’s balance sheet. In these liabilities, we include.
In share capital of company, we have to show authorized capital, subscribed capital, called up capital and paid up capital. For calculating paid up capital, we will deduct calls unpaid and add original paid up amount offorfeited shares.
2. Reserves and Surplus
Following reserves will be shown in liabilities side of balance sheet of company.
i) Capital reserves
ii) Share premium account
iii) Other reserves
iv) Surplus balance in profit and loss account after providingdividend, bonus or reserves.
3. Secured Loan
If any loan is taken by company after keeping any asset as security, then it will be shown in secured loan head. Its detail is given below.
i) Debentures
ii) Loan and advances from subsidiaries
iii) Other loan and advances
iv) Interest payable on secured loan
4. Unsecured loan
Following will be the unsecured loan.
i) Fixed deposits of public
ii) Short term loans and advances
iii) Other loans
All liabilities which is payable within one year, will be included in current liabilities head.
A) Current Liabilities
i) Acceptance or bill payables
iii) Interest payable other than on loan
B) Provisions
ii) Proposed dividend
iv) Provision for insurance, pension and other staff benefit schemes
v) Other provisions
6. Contingent liabilities
These types of liabilities will not be shown in balance sheet. But a simple footnote is made for its detail. Following may be the contingent liabilities of company.
i) Claims against the company not acknowledge as debts
ii) Uncalled liability on shares paid
iii) Areas of fixed cumulative dividends
iv) Any other contingent liability of company
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