Page 157 - DCOM101_FINANCIAL_ACCOUNTING_I

Unit 12: Final Accounts

To General Office Exps. 90,000 By Gross Profi t b/d 10,41,000 Notes

To Salaries 1,80,000
To Depreciation on Furniture 12,000
To Discount Allowed 9,000
To Carriage Outwards 25,500
To Interest on Bank Loan 1,80,000
To Export Duty 90,000
To Selling Expenses 2,10,000
To Distribution Expenses 30,000

To Net Profit (Transferred to Capital 2,14,500
A/c.)
10,41,000 10,41,000

12.4 Balance Sheet

After the determination of the net profit of the business through the Trading and Profit and Loss

Account, the businessman wants to know the financial position of the business. For this purpose
he prepares a statement which is called the Balance Sheet. The Balance Sheet depicts the fi nancial

position of the business on a fixed date. A Balance Sheet is prepared with those balances of Trial
Balance which are left out (personal and real accounts) after taking out the nominal accounts’
balances to prepare the Trading and Profit and Loss Account. A Balance Sheet has two sides –

assets side and liabilities side. The assets and liabilities are shown in a particular order.
Marshalling of Assets and Liabilities

Order of presenting the assets and liabilities in the balance sheet is called marshalling of assets
and liabilities. A balance sheet may be prepared by marshalling the assets and liabilities in the
following orders:

Balance Sheet prepared in Liquidity Order

Here liquidity means conversion of assets into cash. When a Balance Sheet is prepared on the
basis of liquidity order, more easily convertible assets into cash are shown first and those assets

which can not be easily converted into cash are shown later and so on. In the case of liabilities,
first those liabilities are shown which are payable earlier and then those liabilities are shown

which are payable later. The proforma of such a Balance Sheet is given below:
Proforma of Balance Sheet in Order of Liquidity
(as on ………………….. )
Liabilities ` Assets `
Current Liabilities Current Assets —
Sundry Creditors — Cash in Hand
Bank Overdraft — Cash at Bank —
Short-term Loan — Short-term Investment —
Outstanding Expenses — Prepaid Expenses —
Unaccrued Income — Bills Receivable —
Bills Payable — Accrued Incomes —
Contd...

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