Why Do We Prepare A Balance Sheet?


10 Answers

Anonymous Profile
Anonymous answered
Balance sheet is prepared to know the financial position of the company in terms of Assets and Liabilities as on a specified date.
amber Jhon Profile
amber Jhon answered
Balance sheet is the financial statement, which shows the financial position of the company at a specific date. The balance sheet of a company is very necessary because it shows the sources and uses of funds of an organization. There are three sections of a balance sheet including assets, liabilities and the shareholders' equity. For making the balance sheet, the information is taken from the T-accounts of the company where different accounts with debit and credit entries are organized. The two columns are made on the balance sheet. In the right column the assets are written and in the left column the liabilities and shareholders' equity is written. Assets and liabilities are further categorized into current and non-current sections. All the assets in the T-accounts are written on the assets side and liabilities of the left side. The equity section include the capital stock and the retained earnings of the company. The both sides of the balance sheet has to be equal or:

Assets = Liabilities + Shareholders' equity

In this way, the balance sheet is prepared.
Yasir Baqar Profile
Yasir Baqar answered
A balance sheet is a summary of Company's whole activities status.

It is a source through which a shareholder analyse the current and future status of a company.

Bipul Darad Profile
Bipul Darad answered
Balance sheet is a financial statments which shows the Position and performance of an organistaion. It includes the total assests,Liablities and the Capital involved in the business.
donna jackson Profile
donna jackson answered
A balance sheet is normally prepared by a book keeper or an accountant. It is, simply put, a record of entries in a business, of expenditure and earnings, or debits and credits.
You balance these two against each other, to see whether the debits are more, or the credits are, if the credits win you are in profit, and if the debits win you are in debt.
This is really what you do with your salary each month. You take out your rent, your electricity and phone bill, then your accounts you are paying off, you write them in a long list.
Then you get your salary ,and any investments you may have that make you interest and earn you money ( lucky you) and the gift of money you got for Christmas (even luckier you) and you add it all up, and balance them against each other.
I hope what you get is a credit!
Anonymous Profile
Anonymous answered
A balance sheet is a reflection of the state of affairs of a company. It is normally drawn in a T form and contains the 'Sources of Funds' on the left hand side and the 'Application of Funds' on the right hand side. This is the style practiced in the United Kingdom. However, in the United States, the Sources and Application of Funds reverse their sides. The sources of funds comprise issued share capital of the company, free and encumbered reserves, debts and other long and short term liabilities (including trade creditors). The application of funds comprises fixed assets, investments made by the company in stocks, inventories, bank balances and current assets (including trade debtors). The balance sheet is a summary of the annual / quarterly transactions as captured in the company's general ledger.
Stuti Ahuja Profile
Stuti Ahuja answered
There is some data necessary for accurate financial statement. You can start with compiling company's financial records for all its assets like equipment, inventory, furniture etc and liabilities like personal or bank loans. There should also be a record of the amounts and sources of cash expended to commence the business. You should be bale to tell how much you owe and estimate what % of accounts receivable may not be received.

Once this is in place, you must know that a balance sheet is a summary of a firm's assets, liabilities and net worth and a simple formula is applicable ASSETS=LIABILITIES+NET WORTH. The format of a balance sheet is universal, it is in 2 columns, assets on the left and liability on the right, net worth is beneath liabilities. If you make it in one column, assets are listed first followed by liabilities and net worth.
Complete the current asset section on the worksheet followed by the fixed asset section and the other asset section and then compute the total assets of your business. Follow the same procedure with liabilities section of the worksheet and compute total liabilities. Now calculate NETWORTH=ASSETS—LIABILITIES.
Anonymous Profile
Anonymous answered
Balance sheet prepares for showing the financial position of the company by the end of financial year. In the Balance sheet, we can show the assets and liabilities of the company which is occurred by the company during the financial year.

Of course, it shows that company is standing on the profit or might be on loss so it is compulsory for showing the financial position by the end of March.

This is main reason to prepare the Balance sheet of the company.
Neeraj Gourikar Profile
Neeraj Gourikar answered
Balance Sheet exhibits the financial soundness of the company as a
whole. It gives almost complete picture to any party interested any
type of relation with the company. It gives a birds eyes view of assets
and liabilities that company possess and Profit / Loss that company has
incurred or is projected. For taking any financial decision ( Loan
disbursement, IPO investment etc.) there are some basic ratios to be
calculated , balance sheet can be the base of such ratios.
In simple words, it shows the financial position of the business. So, it's the main reason for preparing a balance sheet.

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