Balance Sheet can be prepared in the horizontal format where Assets and Liabilities are shown on the left and right sides, respectively, or in the vertical format, where all details are listed one below the other. No specific advantage can be claimed for any method.
It is also customary to give comparative figures for at least one previous date in all BS. This helps the user to come to his own judgments.
Sometimes, even long-term liabilities are counted as current liabilities provided its payment is to be made from current assets. If the current assets are almost double of current liabilities, the financial position of the business concern is supposed to be good.
Preference shares, loans, deposits, etc. are sometimes called fixed-return capital - since the dividend or interest payable on them is fixed (whereas dividend rate can vary).
The difference between current assets and current liabilities is taken as one definition of WORKING CAPITAL. In case, it is not sufficient, the day-to-day working will become difficult for the business.
The details out of which the condensed statements in the BS are arrived at are to be given in SCHEDULES to be attached and should be referred to in the BS.
The BS should be duly audited by approved AUDITORS who should also signify their satisfaction and also bring out all of the most important points for public information.
BS and P & L A/c of subsidiary companies, if any, should also be appended to the prime (or holding) company's BS.
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