Preparation of New Balance Sheet in 6 Simple Steps

The following are the various steps involved in the preparation of the New Balance Sheet.

Preparation of New Balance Sheet

Step 1: Firstly, all the assets are recorded on the Right Hand Side of the Balance Sheet, and all the Liabilities are recorded on the Left Hand Side on their net value i.e. after all adjustments in their values.

Step 2: There can be two probable cases of adjustments namely, to or by. In case the assets are increased or decreased, then the final value itself is shown in the New Balance Sheet. For Example, the value of machinery increased to Rs 10,000. In the New Balance Sheet machinery will be shown at Rs 10,000. On the other hand, if the assets are increased or decreased by, then the value of the asset is shown at its net value (i.e. after adding or subtracting the value as the case may be). For example, a Machinery of Rs 40,000 is increased by Rs 6,000. In the New Balance Sheet, machinery will be shown at Rs 46,000 (40,000 + 6,000).

Step 3: Similarly, Liabilities are also shown at their final value after considering all the adjustments.

Step 4: The funds such as Workmen’s Compensation Fund, Investment Fluctuation Fund, and Contingency Reserve are shown in the New Balance Sheet at the value given in the adjustment. Example: In case no adjustment regarding these funds is given, then these are not shown in the New Balance Sheet; rather these are distributed among all the partners in the old ratio.

Step 5: Now, the Unrecorded Assets and Liabilities found at the time of revaluation are to be shown in the New Balance Sheet.

Step 6: Capital Balances of the partners revealed through Partners’ Capital Account after all adjustments are recorded on the Liabilities side of the Balance Sheet. In case the Partners’ Capital Account shows a debit balance (i.e. balance c/d on the credit side) then it is shown on the Assets side of the Balance Sheet.

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