Balance sheet represents the snapshot of financial position of business firm at any given point of time. It represents the assets, liabilities and equity of firm on a particular day.
A Balance sheet always relates to a particular point of time or date and not a period. It is always expressed in monetary value. It is usually prepared on close of the accounting period. It is one of the financial statements of a business.
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The Balance Sheet consists of:
The balance sheet of firm can be represented in two forms:
Assets are resources owned by firm which are expected to provide the future benefits to firm. The benefits can be in the form of higher cash inflow or lower cash outflow.
Assets are classified as:
Non-Current assets are long lived assets. It comprises of:
It consists of all assets which are held in form of cash or are likely to be converted into cash in near future or in operating cycle of business. The operating cycle is the time period taken to convert cash into inventory and selling inventory, converting receivables to cash. An asset is said to be current asset if:
It comprises of:
The liability represents what the firm owes to others. These are claims of outsiders raised against the business. The business uses various good and services on credit to conduct its normal course of operations. The liabilities of firm are classified as:
It is the contribution made by shareholders of firm. Technically, it is the capital infused by owners of the business concern. It is further classified as:
Those liabilities which are to be paid after one year.
Liabilities which are due to be settled within 12 months. These liabilities are due for payment in short run.
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