Contents of Balance Sheet

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All reports prepared in business require content or data because no report can be prepared without content. Each report prepared in business has its own features and each report requires related content. Whatever activity takes place in business is used as data or content. Accounting reports are prepared from accounting data and accounting data is obtained from the accounting process. One of these reports is the financial statement or financial report which includes the balance sheet.

Balance sheet is prepared to know about the financial position of the business, and it is prepared after preparing other reports of financial statements as it requires the final balance of all the accounts or the nature of the transactions. This shows how much liability the business has and how much ownership it has. There are many other reasons for preparing it like making decisions, taking loans, attracting external resources, etc. The balance sheet is used with all financial statements because all are related to each other in some way.

Contents of Balance Sheet

Following are the contents of the balance sheet:

1. Liabilities:

It includes all the liabilities of the business, like owner’s share, creditors, loans, debentures, outstanding dues, etc. Liabilities usually appear first on the balance sheet, mainly because the business runs on liabilities. Whoever invests in a business, whether in the form of money or in the form of goods and services, has liability to the business until the business returns all the investments as per the rules. Liabilities are divided into the following parts.

1. Owner’s Share: All the owner’s share comes under this and in the balance sheet it is shown on the liabilities side because the owner’s share is the liability of the business and the business has to pay all the owner’s share. It includes investments, profits, etc. and is considered the first liability of the business because the owner is the first person to invest in the business.
2. Long-Term Liability: Long-term liabilities are also known as non-current liabilities and include all those liabilities whose payment period is more than one year. These mostly include loans, debentures, and long-term borrowing instruments, etc. and play an important role in running the business. It is shown on the liability side of the balance sheet.
3. Short-Term Liabilities: Short-term liabilities are also known as current liabilities and include all those liabilities whose payment period is one year or less. It mainly includes creditors, short-term loans, outstanding dues, short-term borrowing instruments, etc., and plays a very important role in running the business. Short-term liabilities are shown on the liability side of the balance sheet.

2. Assets:

It includes all the assets of the business, like debtors, cash, banks, advance payments, closing stock, assets, etc. In business, assets equal liabilities because the double entry system is applied in accounting. Generally, assets are shown after liabilities in the balance sheet because in a business liabilities come first and then assets. Assets play a very important role in the operation of business. The assets are divided into the following parts.

1. Fixed Assets: Fixed assets are also known as long-term assets or non-current assets and include buildings, vehicles, computers, patents, copyrights, etc. The main purpose of fixed assets is to aid the functioning of the business. Making a profit by selling these is not the objective of the business but the nature of the business can affect it. Fixed assets are shown on the asset side of the balance sheet.
2. Current Assets: Current assets are also known as short-term assets or working assets and include cash, banks, debtors, advance payments, stocks, etc. The main objective of these assets is to earn profit, but the nature of the business can affect it. Converting current assets into cash is easier than fixed assets as they involve less compliance. Current assets are shown on the asset side of the balance sheet.

Read Also:

• What is a Balance Sheet? Meaning, Features, and More.
• Objectives of Balance Sheet
• Format of Balance Sheet

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