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New format of Balance Sheet

New format of Balance Sheet

Various accounting terms of new format of balance sheet:

1. Share Capital:

Share capital refers to the part of company’s equity that they will get by trading stock between the shareholders for obtaining cash from public by issue of their shares. All the amount of company’s share capital is getting by issue the shares in stock market. It is also known as Capital Stock. The amount of share capital reports on its balance sheet at the liability side. However, according to the new format, initial amount of shares (which purchase by the shareholders at the initial price from issuing company) are included in share capital of company and they shown at their separate heading in the category of shareholders. In share capital, various factors are included such as, the amount and number of authorised shares, number of fully paid up and subscribed shares, par value of per share and others.

2. Reserve and Surplus:

Company may decide to transfer a part of their profit into a reserve and retain the balance of profit in the profit and loss account. The reserve, which is created by out of profits transferred from profit and loss account, is known as General reserve and the balance in the profit and loss account, is known as Surplus. These both terms are shown under the balance sheet by a separate heading in the category of shareholders funds.

Company can use  their reserve and surplus for various purposes. For example, they can use for issuing a Bonus Shares, they can use for issuing a Dividend (when the amount of profit is insufficient), and many other purposes.

We can classified the reserve and surplus as:

(i) Capital Reserves,

(ii) Debenture Redemption Reserve,

(iii) Capital Redemption Reserve,

(iv) Securities Premium Reserve,

(v) Share option outstanding account,

(vi) Revaluation Reserve,

(vii) Other reserves

(viii) Surplus i.e balance from profit and loss account will transfer to reserve.

3. Money received against share warrants:

Share warrants refer  to the legal document which is issued by only the public company. Company issue the share warrants when they wants to issue  their company’s paid up shares in a stock market. Shareholders have brought these warrants for purchasing any company’s shares. However, it is not issued by private company because private companies have no rights for issuing any share warrant in a general public. It is easily transferred one shareholder to others.

We have to showed total money received from the share warrants in a holding company balance sheet by a separate heading.

Non current liabilities:

4. Long term borrowings:

In the category of Long term borrowings, there are all types of debts are included whose time period is more than one year. Various factors are included in this category, such as:

1. Bonds/Debentures

2. Deferred payment liabilities.

3. Term loans:

  (i) from banks,

 (ii) from other parties.

4. Long term maturities of finance lease obligations.

5. Loan and advances from other related parties.

6. Other loans and advances.

5. Deferred tax liability:

Deferred tax liability refers to the provision for future taxation. Provision for tax is generally for provision of current year tax but this is not for current year tax. It shows the difference between the value of assets as per income tax acts and as per books of accounts. It classified the difference between profit as per income tax act and profit as per books of accounts. Depreciation is the main reason of this classification. The rate of depreciation of books of account and income tax act is not similar.

6. Other Long term liabilities:

In this category, the following factors are included:

(i) Trade payables: Debts payable to creditors, lenders, vendors or supplier of product, are known as trade payables.

(ii) Others

7. Long term provisions:

Provision means an amount which would be payable in future but organise at present, therefore, a long term provisions refer to those provision which provides benefits after long term period. Long term provisions are classified as:

(i) Provision for employee benefits, i.e. Provident fund

(ii) others (specify nature)

Current Liabilities:

8. Short term borrowings:

In the heading of short term borrowings, there are all types of debts are included whose time period is less than one year. Various factors are included in this heading, such as:

(a) Loans and advance from related parties,

(b) Loans repayable on demand,

    (i) from banks

    (ii) from other parties

(c.) Other loans and advances (specify nature)

(d) Deposits

9. Trade Payables:

Debts payable to creditors, lenders, vendors or supplier of product, are known as trade payables.

10. Other current Liabilities:

11. Short term Provisions:

Provision means an amount which would be payable in future but organise at present, therefore, a short term provisions refer to those provision which provides benefits in short period of time. Short term provisions are classified as:

(i) Provision for employee benefits,

(ii) others (specify nature

These all terms, which we define at above, are included in the liabilities side of company balance sheet but yet we discuss about the new format of balance sheet, then these all terms are included in the heading of Equities and Liabilities.

Well, after discuss about the terms of Equities and Liabilities, we discuss about the various terms of company assets. In the new format of balance sheet, company assets are diversified into two types of assets:

(a) Non-current Assets

(b) Current Assets

Therefore, first of all, we will discuss about the terms of Non-current Assets, which are as follows:

12. Fixed Assets:

Fixed assets refer to those assets which have their physical existence and which can help to generate company incomes during a specified period of time. We can’t expect from fixed assets to convert into physical cash any sooner than at least one year time. We can include the following terms into a Fixed assets:

(i) Tangible Assets:

Tangible assets refer to those assets which have their own physical existence. There includes all those fixed assets which we can see and touch, i.e. plant, machinery, furniture, building, etc.

(ii) Intangible Assets:

Intangible assets refer to those assets which does not have their own physical existence and we cannot see and touch of those assets, are known as Intangible assets, i.e. Goodwill, Patents, Trademarks, Copyrights, etc.

(iii) Capital Work-in-progress

(iv) Intangible Assets Under Development

13. Non-current Investments:

We can classify the non-current investments as trade investments and other investments. The following investments are included in Nor-current investment:

(i) Investment in Equity Instruments

(ii) Investment Property

(iii) Investments in Debentures or Bonds

(iv) Investments in preference shares

(v) Investments in partnership firms

(vi) Investments in government or trust securities.

(vii) Other non-current investment (Specify Nature)

14. Long term loans and advances:

Loans, which we consider for long period time, is known as long term loans and advances, i.e car loan, home loan, etc.

We can classify the long term loans and advances as:

1. Security Deposits

2. Loans and advances to related parties (giving details thereof)

3. Capital Deposits

4. Others loans and advances (Specify nature)

5. Allowances for bad and doubtful loan and advances are also included but it disclose in balance sheet by a relevant separate heading.

15. Other non-current assets:

Non-current assets refer to those assets which total cost is not realized in current year, is known as non-current assets. However, it depends on the nature of assets. The following components are included in noncurrent assets, such as:

(i) Long term trade receivables, i.e. secured, unsecured considered goods, doubtful.

(ii) Others (Specify nature), i.e. Allowance for bad and doubtful assets, debts due by directors and members of company.

16. Current Investments:

We can classify current investments as:

(i)  Investment in preference shares

(ii) Investment in equity shares,

(iii) Investment in debentures and bonds,

(iv) Aggregate amount of market value of quoted investments,

(v) Investment in partnership firm,

(vi) Investment in mutual fund

17. Inventories:

Inventories are considered as portion of business assets and those goods are included in inventory which are ready and which will be ready for sale. It is one of the most significant business assets because inventory turnover represents the revenue and sales of company for the company’s owners/shareholders. The following goods are included in this category:

(i) Stock in trade,

(ii) Raw materials

(iii) Finished goods

(iv) Loose tools,

(v) Stores and spares

(vi) Others (specify nature)

18. Trade receivables:

Trade receivables refer to the amount of debtors which is borrowed by their clients for business purpose and which is shown in the balance sheet at the asset side.

The following components are included:

(i) Sundry Debtors

(ii) Debts due by directors and members of companies,

(iii) Allowance for bad and doubtful assets

19. Cash and cash equivalents:

All those things which is closely related to cash and their equivalents, i.e.

(i) Balance with banks,

(ii) cash in hand,

(iii) Cheque, drafts on hand,

(iv) Others (Specify nature)

20. Short term loan and advances:

Loans, which we consider for a short period of time, is known as short term loans and advances, i.e car loan, home loan, etc.

We can classify the short term loans and advances as:

1. Loans and advances to related parties (giving details thereof)

2. Others loans and advances (Specify nature)

3. Allowances for bad and doubtful loan and advances are also included but it disclose in balance sheet by a relevant separate heading.

4. Debts due by directors and members of companies.

21. Other current assets:

Assets, which does not includes in the category of other assets.

22. Contingent Liability and Commitments:

Contingent liability refers to that liability which is not directly related to that person who gives any guarantee and sign on any promissory note as an accommodation endorser. They require for paying the amount of borrower when he makes any default in their payment. As a result, if borrower makes any default in their payment, then endorser and guarantor are required to pay their amount, which is known as a Contingent Liability.

New format of Balance Sheet

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