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  1. This answer was edited.

    Balance Sheet is a statement showing the financial position of a business entity on a particular day. It shows the liabilities and assets of the business.

    Steps to prepare Balance Sheet from Trial Balance

    All the debit side items related to assets listed in the trial balance shall be posted on the assets side of the balance sheet. All the credit side items related to capital and liabilities listed in the trial balance shall be posted on the liabilities side of the balance sheet.

    1. Post the amount of capital on the liabilities side of the balance sheet under the head “capital & reserves”.

    2. Then, the net profit or net loss ascertained while preparing the income statement shall be added or reduced respectively from the amount of capital.

    3. Now, post all the “non-current liabilities” such as long-term bank loan, long-term debentures issued, etc on the liabilities side of the balance sheet.

    4. Then, post the “current liabilities” such as sundry creditors, bills payable, etc. Incorporate necessary adjustments related to outstanding expenses and pre-received income.

    5. Moving to the asset side, start with the head “non-current assets”.

    6. First, post the tangible assets under the head “non-current assets” such as plant & machinery, land & building, etc. Calculate depreciation/accumulated depreciation on the tangible assets and deduct the same to arrive at the net value.

    7. Second, post the intangible assets under the head “non-current assets” such as software, goodwill, etc. Calculate amortization/accumulated amortization on the intangible assets and deduct the same to arrive at the net value.

    8. Now, post all the long-term investments acquired such as bonds and debentures under the head “non-current assets”.

    9. After posting all the non-current assets, move forward to posting the “current assets” on the asset side of the balance sheet,

    10. Post “current assets” such as cash in hand, cash at bank, sundry debtors, bills receivable, etc. Incorporate necessary adjustments related to provision for doubtful debts, prepaid expenses, outstanding income,.

    11. Post the amount of closing stock given in the adjustments under the head “current assets”.

    12. The final step is totaling both the liability and asset side. Both sides of the balance sheet should be of equal amount.

    These steps complete the process of preparation of the balance sheet from the trial balance.

    Illustration

    A snippet of trial balance and balance sheet has been attached for better understanding.

    Trial Balance

    Prepare Balance Sheet from the above given trial balance. Net Profit for the year ended 31/03/yyyy is 610,000.

    Balance Sheet

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