Outline of A Balance Sheet

Outline of A Balance Sheet

Outline of a balance sheet

Capital, which is the foundation of any company's business, is raised by the company's issuing to the investing public ordinary and preference shares, represented in the balance sheet as follows;

Liabilities Assets

Ordinary shares

Pan of the cash is exchanged for fixed assets for production such as land, buildings, plant, machinery, etc. A further part is exchanged for current assets such as stock-in-trade, and the remainder is cash at bank The balance sheet would be as follows

Liabilities Assets

CAPITAL:FIXED ASSETS:

Preference shares ....Land, buildings, ete.

Ordinary shares ....CURRENT ASSETS:

Stock-in-trade ......

Cash at bank ......

If part of the fixed assets (e.g., lance is sold at above the original cost, this will introduce new cash creating a new liability which may be called capital reserves (being profit of capital nature). This new cash, instead of lying idle in the bank, may be invested in outside investments (e.g., shares of other companies). The balance sheet would then be as follows:

Liabilities

CAPITAL: C

Preference shares

Ordinary shares

CAPITAL RESERVES

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