Balance Sheet
Complete Guide & Proforma
Full Proforma · Capital Adjustments · Fixed Assets · Investments · Current Assets · All Liabilities
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📝 Handwritten Class Note
CA Devesh Thakur’s handwritten note for Day 28 — save it for quick revision!
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Balance Sheet — Ek Financial Snapshot 📸
Aaj Day 28 mein hum Balance Sheet ka complete study karenge. Balance Sheet ek aisi financial statement hai jo ek specific date pe business ki financial position dikhati hai — 31st March jaisi. Yeh batati hai: Business kya owns karta hai (Assets) aur Business kya owes karta hai (Liabilities + Capital). Fundamental equation: Assets = Liabilities + Capital. Is equation ka balance nahi hua toh accounting mein galti hai!
⚖️ The Fundamental Accounting Equation
ASSETS
A
What business owns
=
LIABILITIES
L
What business owes
+
CAPITAL
C
Owner’s equity
If this equation does not balance → error in accounting records
📄 Balance Sheet — Full Proforma
🔢 Capital A/c — Complete Formula
Closing Capital = Opening Capital + Additional Capital + Net Profit + Interest on Capital − Drawings − Interest on Drawings − Income Tax − Net Loss
| Capital Adjustment | Effect | Reason |
|---|---|---|
| Opening Capital | Base | Starting point from last year B/S |
| Add: Additional Capital Introduced | (+) | Fresh investment by owner |
| Add: Interest on Capital | (+) | Reward for owner’s investment |
| Add: Net Profit for the Year | (+) | Profit earned belongs to owner |
| Less: Drawings | (−) | Cash/goods withdrawn by owner |
| Less: Income Tax | (−) | Personal tax of proprietor/partner |
| Less: Interest on Drawings | (−) | Penalty on drawings |
| Less: Net Loss for the Year | (−) | Loss reduces owner’s equity |
🏗️ Assets — Complete Classification
📋 Liabilities — Complete Classification
🏦 Secured Loans
Loans backed by collateral/security.
🤝 Unsecured Loans
Loans without any collateral security.
👥 Employee Benefits
Dues payable to employees.
🏧 Bank Overdraft
Short-term borrowing from bank — Current Liability.
🛒 Sundry Creditors
Payable to suppliers for credit purchases.
📊 Deferred Tax Liability
Future tax payable — timing differences.
📝 10-Step Methodology — Preparing a Balance Sheet
Prepare the Trial Balance
Pass all Adjustment Entries (year-end)
Prepare Trading Account → Gross Profit
Prepare P&L Account → Net Profit/Loss
Determine Net Profit or Net Loss
Adjust Capital Account (all additions/deductions)
Classify all Assets (Fixed, Current, Investments)
Classify all Liabilities (Capital, Loans, Current)
Prepare the Balance Sheet
Verify: Assets = Liabilities + Capital ✅
Common Mistakes — Balance Sheet
1. Revenue expenses in B/S: Salary, Rent, Electricity → P&L only. Revenue expenses NEVER appear in Balance Sheet.
2. Capital expenses in P&L: Machinery, Building purchase → Fixed Asset in B/S. NOT an expense in P&L.
3. Bank OD as Asset: Bank OD = Cr. balance in Bank A/c = LIABILITY — goes to Liabilities side, not Assets.
4. Closing Stock in Trial Balance: Closing Stock does NOT appear in Trial Balance — it’s an adjustment entry item. It goes to Trading A/c (Cr.) and B/S (Asset).
5. Net Profit not transferred to Capital: Always transfer Net Profit/Loss to Capital before preparing B/S.
Connection with Previous Days
Day 27 (Ledger → TB → P&L → B/S): Aaj B/S ka deep dive kiya — Day 27 mein overview tha, aaj full proforma aur classification.
Day 26 (Adjustment Entries): Outstanding → Current Liability | Prepaid → Current Asset | Depreciation → Fixed Asset reduce — sab B/S mein dikhte hain.
Day 25 (Types of Entries): Transfer Entry — Net Profit → Capital. Yahi aaj Capital A/c adjustment mein “Add: Net Profit” hai.
📊 Quick Classification Reference
| Item | Classification | Side in B/S |
|---|---|---|
| Owner’s Investment | Capital | Liabilities Side |
| Business Profit | Added to Capital | Liabilities Side |
| Drawings | Deducted from Capital | Liabilities Side (−) |
| Land, Building, Machinery | Fixed Asset | Assets Side |
| Goodwill, Patents, TM | Intangible Fixed Asset | Assets Side |
| Closing Stock / Inventory | Current Asset | Assets Side |
| Debtors / Receivables | Current Asset | Assets Side |
| Cash & Bank | Current Asset | Assets Side |
| Prepaid Expenses | Current Asset | Assets Side |
| Creditors / Trade Payables | Current Liability | Liabilities Side |
| Outstanding Expenses | Current Liability | Liabilities Side |
| Bank OD | Current Liability | Liabilities Side |
| EPF / ESI Payable | Current Liability | Liabilities Side |
| Bank Term Loan | Secured Loan | Liabilities Side |
| Loans from Relatives | Unsecured Loan | Liabilities Side |
| Shares, MF, Bonds | Investments | Assets Side |