Accounting 101: Understanding the Basics of Balance Sheets - Deepstash

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Accounting-Balance Sheet

Accounting-Balance Sheet

What is a balance sheet?

As the name suggests, a balance sheet is a financial statement that provides a snapshot of the overall business position of a Company. A balance sheet can be prepared as on any said date. For example, balance sheet of 31.03.2023 shows the position of the Company as on 31.03.2023

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Who needs a balance sheet?

Who needs a balance sheet?

a) Accountants and finance managers who are tracking the performance of the Company

b) Upper management directly responsible to board

c) Outside potential investors

d) Investors already invested in the Company

e)Government, regulators and stock markets

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Items of a balance sheet

Items of a balance sheet

Basically there are three items in a balance sheet.

a)Owner's equity or Capital

b)Liabilities

c)Assets

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Owner's Equity

Owner's Equity

Basically, It is the money brought in by the promoter.

It includes paid up capital, premium reserves after issuing shares, surplus reserves etc

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Liabilities

Liabilities

It is the money the Company has borrowed from outside for it's business. It includes all outside short term and long term borrowings

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Assets

Assets

Assets are the deployment of the funds created by the Company

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Equation of the balance sheet

Equation of the balance sheet

Assets= Liabilities+ Owner's equity or capital.

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CURATOR'S NOTE

I like finance

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