What is a balance sheet. What are its characteristics?
Answers
Balance Sheet can be defined as a sheet or an interim report in which a list of balances of the assets, liabilities and owner’s equity of an enterprise at a specified date are noted down.
Its characteristics are:
- The Balance Sheet is prepared not for a period, but for a particular date.
- It depicts the nature and value of assets and liabilities and the position of capital on a given date.
- It is a statement, not an account.
- The total of both sides i.e Liabilities and Assets are always equal.
- It reflects the true financial position of a firm.
Explanation:
A Balance Sheet refers to the position statement, which lists out the balances of the assets, liabilities and owner’s equity, i.e. capital, of an enterprise at a specified date. While the assets show the resources owned by the company, liabilities and capital exhibits the funding of resources.
Characteristics of Balance Sheet
1. The preparation of Balance Sheet is not for a period, but at a particular date.
2. The preparation of the balance sheet is possible only when profit and loss account for the period is prepared because it reflects the financial position of the company adequately. That is the reason behind why the Profit & Loss Account, Balance Sheet and Cash flow Statement are collectively called as Final Accounts.
3. The totals of the two sides, i.e. assets and liabilities of the balance sheet must tally as Assets = Liabilities + Capital. If not so, then there must be an error.
4. The balance sheet reflects the nature and value of assets and liabilities and the position of capital on a given date.
To learn more:
i) https://brainly.in/question/3141839
ii) https://brainly.in/question/4874279