6 Characteristics of Balance Sheet

The Balance Sheet is the last financial statement that is prepared by any organization. This statement helps to ascertain the true financial position of an enterprise at the end of an accounting period. It is a statement that is prepared to ascertain the values of assets and liabilities of a business on a particular date. In other words, a Balance Sheet can be defined as a financial status report of an organization that imparts information related to various assets and liabilities of an organization at the closing of an accounting period. The preparation of the Balance Sheet is compulsory as it is an integral part of financial statements. It is prepared with the help of real and personal accounts balances. It reveals the solvency and liquidity position of a firm on a particular date. An important point to be noted here is that the Balance Sheet is a statement and not an account. Characteristics of Balance Sheet are

Characteristics of a Balance Sheet

The following are the various characteristics of a Balance Sheet.

  1. It is a statement and not an account hence prepared at a particular date and not for a particular period.
  2. It follows an equation whereby, Liabilities plus Capital is always equal to the Assets. In case, it doesn’t hold true then it means that errors exist.
  3. It shows the financial health of the firm by recording the position of its various assets and liabilities. Hence, constitutes an important statement communicating the results of the business to various stakeholders.
  4. It is prepared only after the Trading, Profit & Loss Account has been prepared. They together constitute the Final Accounts of the business.
  5. It is the last financial statement prepared by an enterprise.
  6. It is prepared after preparing the Trading and Profit and Loss Account.

Also, Read

Trading Account

Trading Account is an account that is prepared to ascertain the trading results of a firm in form of gross profit earned or gross loss incurred during an accounting period.

Users of Financial Statements

The users of financial statements can be broadly classified as Internal Users and External Users. Internal Users are the users who have direct access to the financial statements

Financial Statements

Financial statements reveal the profitability and financial position of a business at the end of the accounting year. It provides financial information to various accounting users that

What is a Promissory Note?

A promissory note is an unconditional promise in writing given by the buyer (or creditor) to the seller (or debtor) to pay the amount of money specified therein to the seller or to the order of seller or to bearer.