The balance sheet is a statement of assets, capital, and liabilities of the business. It is the statement, which depicts the financial position of the business on a particular date.

The balance sheet is one of the important statements for every business organization. It provides information about assets and liabilities to different interested parties like investors, lenders, bankers, creditors, government, and shareholders. The main objectives of balance sheet are as follows: -

1. To present the actual financial position of the business on a given date.
2. To know the amount of trade debtors and creditors.
3. To show the nature, value and position of all the assets and liabilities.
4. To help to determine the actual value of the business at the time of sale or liquidation.
5. To know the amount of capital owing to the owner at the close of the year.
6. To help to obtain a loan from financial institutions by reflecting the actual financial position of the business.
7. To serve as an evidence for setting disputes.
8. To help to judge the liquidity and solvency position of the business.
9. To help to evaluate the strengths and weaknesses of the business.
10. To supply reliable information regarding assets and liabilities for making a comparison and preparing plans and policies.

The following are the main advantages and importance of balance sheet: -

1. It presents the true financial position of the business on a particular date. It gives the information about assets, capital and liabilities of the business.
2. It helps to judge the liquidity and solvency position of the business.
3. It provides the information of net profit or the net loss of the business during the year. The net profit is added to the capital, and net loss is deducted from the capital.
4. It helps to evaluate the strengths and weaknesses of the business.
5. It provides the reliable information about assets, liabilities and capital of the business, which helps in obtaining a loan from financial institutions.
6. It helps for settling disputes.
7. It helps for selling the business by presenting the true value of assets and liabilities.

The balance sheet is a statement of assets, capital, and liabilities of the business. It is not an account rather a financial statement. It presents the liability on the left-hand side and the assets on its right-hand side either in order of permanence or order of liquidity.

According to Palmer,“Balance sheet is a statement of a particular date showing on one side the trader’s property and on the other side, the liabilities.”

According toO. P. Gupta,“Balance sheet is a mirror, which reflect the true position of assets and liabilities of a business on a particular date.”

From the above definition, it is clear that balance sheetis the statement, which depicts the financial position of the business on a particular date. It provides information about assets and liabilities to different interested parties like investors, lenders, bankers, creditors, government, and shareholders.

The balance sheet is a statement of assets, capital, and liabilities of the business. It is the statement, which depicts the financial position of the business on a particular date.

The following are the main objectives of balance sheet:

1. To present the actual financial position of the business on a given date.
2. To know the amount of trade debtors and creditors.

The following are the main advantages of balance sheet:

1. It presents the true financial position of the business on a particular date. It gives the information about assets, capital and liabilities of the business.
2. It helps to judge the liquidity and solvency position of the business.

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