What is a Balance Sheet?
A balance sheet records a company’s assets, shareholders’ and liabilities equity at a particular point of time and furnishes a basis for calculating rates of return and assessing its capital substructure. It is a financial statement that furnishes a print of what a company possesses and incurs, and the amount invested by investors.
‘Not-for-Profit’ Organisations design Balance Sheet for determining the financial position of the establishment. The preparation of their B/S is on the same pattern as of the trade entities. It depicts liabilities and assets as during the end of the year. Assets are depicted on the right hand side whereas the liabilities are depicted on the left hand side. However, there will be a General Fund or Capital Fund in place of the Capital and the surfeit or deficit as per Income and Expenditure A/c which is either deducted from or added to the capital fund, as the scenario may be. It is a common practice to add some of the subsidized items like entrance fees, legacies and life membership fees precisely in the capital fund.
Characteristic features of Balance Sheet :
Comprehending the available assets and liabilities: When a balance sheet is prepared, current assets and liabilities will be classified clearly to inform the company of their obtainability, such as :-
- Fictitious assets
- Liquid assets
- Current assets
- Fixed assets
- Current liabilities
- Fixed liabilities
The above mentioned is the concept that is explained in detail about Balance Sheet and its characteristic features for the class 12 students. To know more, stay tuned to BYJU’S.