Format of Balance Sheet

There is no specific form of balance sheet for non-corporate entities like sole proprietorship firms and partnership firms. But, the assets and liabilities may be shown in the order of,

1. Liquidity, or

2. Permanency.

1. Liquidity Order: The assets, which are easily convertible into cash (called as liquid assets) come first and those, which cannot be readily converted, come next and so on. Similarly, liabilities are also arranged in this manner. The liabilities which are payable on a priority basis come first, and those payable later come next and so on.

2. Permanency Order: In the order of permanency, permanent assets are shown first and those of less permanent are shown next and so on. In other words, fixed assets are shown first, followed by liquid assets. On the liabilities side, permanent liabilities are shown first and less permanent ones are shown next and so on. In other words, capital is shown first followed by long-term liabilities, short-term liabilities and current liabilities in that order.

In India, the Balance Sheet of companies  is required to be set out in the forms prescribed under Part I of Schedule VI. Part I of Schedule VI contains two forms of Balance Sheet - (1) Horizontal Form, and (2) Vertical Form. The Horizontal Form of Balance sheet is given at the end of the chapter. Most companies today follow, the Vertical form of Balance Sheet due to the demand for a more understandable and satisfactory format as given above (on previous page).

Most companies in India follow the Vertical Form of Balance Sheet because it holds the following advantages:

1. Easily Comprehensible:  The traditional form of balance sheet was difficult to understand by a wide variety of users most of whom were not conversant with the principles of accounting. The Vertical form of Balance Sheet can be easily comprehended by all.

2. Bird's View: Only broad heads are shown in the Balance Sheet without too many details. These details are shown in schedules and are cross referenced against the Balance Sheet's broad heads. This helps the readers to get a bird's view of the position of the company and at the same time get more details through the schedules.

3. Classification: The Balance Sheet is classified as 'Sources of Funds' and 'Application of Funds'.  The Sources of Funds comprise Shareholder's equity and Long-term debt and the Application of funds comprise application towards 'Fixed Assets' and 'Working Capital'. Such nomenclature also facilitates understandability. In the traditional form of Balance Sheet the net working capital of the company could not be easily figured; however, this has been taken care of in the Vertical form of Balance Sheet.

4. The introduction of schedules which form a part of the Financial Statements has given scope for more disclosure and inclusion of details giving a better picture of the item being analyzed.

Email based Accounting assignment help - homework help at Expertsmind

Are you searching Accounting expert for help with Format of Balance Sheet questions?  Format of Balance Sheet topic is not easier to learn without external help?  We at www.expertsmind.com offer finest service of Accounting assignment help and Accounting homework help. Live tutors are available for 24x7 hours helping students in their Format of Balance Sheet related problems. We provide step by step Format of Balance Sheet question's answers with 100% plagiarism free content. We prepare quality content and notes for Format of Balance Sheet topic under  Accounting theory and study material. These are avail for subscribed users and they can get advantages anytime.

Why Expertsmind for assignment help

1. Higher degree holder and experienced experts network
2. Punctuality and responsibility of work
3. Quality solution with 100% plagiarism free answers
4. Time on Delivery
5. Privacy of information and details
6. Excellence in solving Accounting questions in excels and word format.
7. Best tutoring assistance 24x7 hours