Balance sheet = Balancing of Assets & Liabilities
(बैलेंस शीट = संपत्ति और देनदारियों का संतुलन )
Balance Sheet is the financial statement of a company which includes assets, liabilities, equity capital, total debt, etc. as on a particular date or at a point in time.
A balance sheet includes assets on one side and liabilities on the other. The balance sheet to reflect the true picture of liabilities & assets and it should be tallied. It is also known as Accounting Equation as mentioned below,
Assets = Liabilities + Equity
A balance sheet is more like a snapshot of the financial position of a company at a specified time, usually calculated after every quarter, six months, or one year. Balance Sheet has two main heads > Assets and Liabilities.
Assets are those resources or things which the company owns. They can be divided into current as well as non-current assets or long-term assets.
Liabilities are debts or obligations of a company. It is the amount that the company owes to its creditors. Liabilities can be divided into current liabilities and long-term liabilities.
Another important head in the balance sheet is a shareholder or owner’s equity. Assets are equal to total liabilities and owners’ equity.
Owner’s equity is used when the company is a sole proprietorship and shareholders’ equity is used when the company is a corporation.
Example: Transaction on a balance sheet.
If a company MSD takes a five-year loan from public sector banks for an amount of Rs 10,00,000, it means that the bank will pay the money to MSD Ltd.
The Accountant will increase the cash at bank component by 10,00,000 on the assets front, and at the same time increase the long-term debt account with the same amount, thus balancing both sides (Dual Aspect Concept).
If a company raises Rs 6,00,000 from investors, then its assets (Bank Balance) will increase by that amount, as will its shareholder’s equity (Share Capital).