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After Ascertaining the net profit or loss of the business enterprise, the Businessman would also like to know the exact financial position of his business. For this purpose a statement is prepared which contains all the Assets & Liabilities of the business enterprise. This statement is known as Balance Sheet.
A Balance Sheet can be defined as follows :-
It refers to a statement of Assets & Liabilities of an business enterprise on a particular date.
[Note] :-
• Balance Sheet is a statement, not an account.
• It has no debit or credit side.
• It is prepared on a certain fixed date and not a fixed period.
In a balance Sheet, the Assets & Liabilities are shown in a grouping or order of sequence. This is known as Marshalling of Assets & Liabilities.
Marshalling means grouping or arrangement of Assets and Liabilities in a sequence of order in the balance sheet. We can arrange it Assets & Liabilities in two ways :-
i) As per liquidity :-
Liquidity means which can be easily converted into cash. For example:- Cash, Bank Balance, Stock, Current Liabilities & Assets.
ii) As per Permanency :-
Permanency means which can be returned in a business for long period of time. i.e., For more that 1 year, for example:- Capital, Bank loan, Fixed Assets, long term liability.
After Ascertaining the net profit or loss of the business enterprise, the Businessman would also like to know the exact financial position of his business. For this purpose a statement is prepared which contains all the Assets & Liabilities of the business enterprise. This statement is known as Balance Sheet.
A Balance Sheet can be defined as follows :-
It refers to a statement of Assets & Liabilities of an business enterprise on a particular date.
[Note] :-
• Balance Sheet is a statement, not an account.
• It has no debit or credit side.
• It is prepared on a certain fixed date and not a fixed period.
In a balance Sheet, the Assets & Liabilities are shown in a grouping or order of sequence. This is known as Marshalling of Assets & Liabilities.
Marshalling means grouping or arrangement of Assets and Liabilities in a sequence of order in the balance sheet. We can arrange it Assets & Liabilities in two ways :-
i) As per liquidity :-
Liquidity means which can be easily converted into cash. For example:- Cash, Bank Balance, Stock, Current Liabilities & Assets.
ii) As per Permanency :-
Permanency means which can be returned in a business for long period of time. i.e., For more that 1 year, for example:- Capital, Bank loan, Fixed Assets, long term liability.
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