What Is A Balance Sheet And What Information Does It Convey To An Outsider?
The balance sheet is a statement, which shows the financial position of a business on a particular date. It is a statement of balances of all the accounts real and personal, debit balances of all such accounts represent assets and credit balances represent the liabilities. 1. Principal Objective: The main purpose of preparing balance sheet is to know the financial position of the business at a particular date. 2. Subsidiary Objectives: Though the main aim is to know the exact financial position of the firm at a particular date, yet it serves other purpose as well.It gives information about the actual and real owner’s equity. Though the capital of the owner indicates owner’s equity, yet some other liabilities are to be accounted for against it also. It helps the firm to make provisions against possible future losses. A provision is made in the form of the Reserves.
