Balance sheet, Accounting Standards

Balance sheet is related along with reporting the financial position of an entity on a specific point in time. Such position is conveyed in terms of listing all the things of value owned through the entity as also the claims against these things of value that is responsibilities. The position as represented through, that is Assets. The balance sheet is applicable only till other transaction is carried out through the entity.

The above statement can be elaborated through an illustration:

I want to purchase a car costing Rs. 8, 00,000. To do same, I have to borrow capital or money. A bank agrees to finance me whether I can invests 3, 00,000 on my own.

 Currently, let us follow the sequence of events while I approach the bank along with the proposal. Granting my capability to repay the loan, the banker will ask two exact questions as:

-        What are the things of value you own?

-        How much do you owe, and to whom?

Instead, the banker would like to identify what I am worth in material terms. Then my replies to the questions could be tabulated as given:

 

Rs.

 

Rs.

Personal loan from friend

1,00,000

Balance with bank

3,50,000

 

 

Fixed deposits

1,50,000

 

 

Other personal belongings

5,00,000

 

 

1,00,000

 

 

10,00,000

 

It implies I own Rs. 10,00,000 worth things of value, Rs. 3,50,000 of such could be withdrawn in anytime in cash. It means that I have Rs. 3,50,000 in liquid form. The other Rs. 1,50,000 is in monetary investment and the remain Rs. 5,00,000 is in non-monetary property. Moreover, I owe Rs. 1,00,000 to friend of mine. Instead, he has found a claim against the things of value owned through me to the extent of Rs. 1,00,000. In brief, it implies that I am worth Rs. 10,00,000, claim against my worth is Rs. 1,00,000 and thus my net worth is Rs. 9,00,000. It means that Rs. 9,00,000 is my own claims against the effects of value owned through me or my net worth.

Posted Date: 4/3/2013 6:27:24 AM | Location : United States







Related Discussions:- Balance sheet, Assignment Help, Ask Question on Balance sheet, Get Answer, Expert's Help, Balance sheet Discussions

Write discussion on Balance sheet
Your posts are moderated
Related Questions
Need solution Corporate Financial Accounting Chapter 3 and Chapter 4: Complete PR 3-4A on page 137 using appropriate software. Complete EX 4-4 on page 187 using appropria

Question : (a) One of the characteristics of an agent is "proactiveness". Briefly explain the effect of this characteristic. (b) Give an example of a purely reactive syste

The subsequent items are debited in the profit and loss account as: 1. Administrative expenses comprising office salaries, office lighting, office rent, printing, director's fee

2. Now assume that you have been asked how to account for the destroyed drilling operation in the Gulf of Mexico in terms of the destroyed rig and lost natural resources. For the p

Review and discuss what the general rules are for agricultural produce using US GAAP and IFRS.

During 2011, Lavina Corporation had cash and credit sales of $94,000 and $91,000, respectively. The company also collected accounts receivable of $53,400 and incurred expenses of

procedure followed in govt.system of accounting in india

GAAP are usually developed through professional accounting bodies as American Institute of Certified Public Accountants (AICPA) and ICAI that is Institute of Chartered Accountants

Which ratio measures a business' average payment period? A.  current ratio   B.  liquid ratio C.  trade payables turnover   D.  trade receivables turnover

Objectives of final accounts describe Final Account; know their objectives and preparation of Trading and Loss and Profit Account; find out the difference among Trad