The balance sheet is a snapshot at one date, usually 31 March. It lists assets on one side and liabilities and capital on the other, and the two sides must be equal.
Assets = liabilities + owner's capital
Main headings
| Assets | Liabilities and capital |
|---|---|
| Land, buildings, machinery (net of depreciation) | Owner's capital or share capital and reserves |
| Stock | Bank loans and cash credit |
| Receivables (debtors) | Payables (creditors) |
| Cash and bank | GST and TDS payable |
| Advances to suppliers, deposits | Advances from customers |
What bankers and owners look for
- Current ratio
- current assets ÷ current liabilities. Below 1 means short-term dues exceed short-term assets.
- Debt to equity
- borrowings ÷ owner's funds.
- Receivables and stock
- against sales: are they growing faster than the business?
Format
Companies follow Schedule III of the Companies Act, 2013, which also asks for MSME dues and ageing of receivables and payables to be shown. Proprietors and firms prepare balance sheets for income tax and for their banks.
The balance sheet is only as good as its stock count, its party balances and its bank reconciliation.