Question

What is a Balance sheet? What are its characteristics?

Answer 1

After determination of financial results by preparation of Trading and Profit and Loss account, balance sheet is prepared to record capital liabilities and assets of the business.

Balance sheet is a statement containing ledger balances of Real and Personal accounts. Unlike Trading and Profit and Loss account, it is not an account.

Characteristics of balance sheet:
(i) It is always prepared on a particular date.
(ii) The total of both the sides must be equal.
(iii) It shows the financial position of the business.
(iv) It is a statement not an account.
(v) It has no debit and credit side.
(vi) Neither 'To' nor 'By' are used before the names of the account.