Balance Sheet Basics
For all beginners I am recapitulating the basics of Balance Sheet. Just a refresher.
Balance Sheet is the snap shot of financial strength of any company at any point of time. It gives the details of the assets and the liabilities of the company. Understanding balance sheet is very important because it gives an idea of the financial strength of the company at any given point of time. Following is the balance sheet of Global Telesystems for the year ending on 31st Mar' 2000:
As on 31-3-00
Assets
Gross Block 3978.55
Net Block 2790.57
Capital WIP 66.72
Investments 454.33
Inventory 610.81
Receivables 1546.81
Other Current Assets 3673.67
Balance Sheet Total 9142.92
Liabilities
Equity Share Capital 434.12
Reserves 5815.65
Total Debt 2096.69
Creditors and Acceptances 393.91
Other current liab/prov. 402.55
Balance Sheet Total 9142.92
Let us take a look at each of its components.
Assets
Gross block is the sum total of all assets of the company valued at their cost of acquisition. This is inclusive of the depreciation that is to be charged on each asset. Net block is the gross block less accumulated depreciation on assets. Net block is actually what the asset are worth to the company.
Capital work in progress, sometimes at the end of the financial year, there is some construction or installation going on in the company, which is not complete, such installation is recorded in the books as capital work in progress because it is asset for the business.
If the company has made some investments out of its free cash, it is recorded under the head investments. Inventory is the stock of goods that a company has at any point of time. Receivables include the debtors of the company, i.e., it includes all those accounts which are to give money back to the company. Other current assets include all the assets, which can be converted into cash within a very short period of time like cash in bank etc.
Equity Share capital is the owner's equity. It is the most permanent source of finance for the company. Reserves include the free reserves of the company which are built out of the genuine profits of the company. Together they are known as net worth of the company.
Total debt includes the long term and the short debt of the company. Long term is for a longer duration, usually for a period more than 3 years like debentures. Short term debt is for a lesser duration, usually for less than a year like bank finance for working capital.
Creditors are those entities to which the company owes money. Other liabilities and provisions include all the liabilities that do not fall under any of the above heads and various provisions made.
For all beginners I am recapitulating the basics of Balance Sheet. Just a refresher.
Balance Sheet is the snap shot of financial strength of any company at any point of time. It gives the details of the assets and the liabilities of the company. Understanding balance sheet is very important because it gives an idea of the financial strength of the company at any given point of time. Following is the balance sheet of Global Telesystems for the year ending on 31st Mar' 2000:
As on 31-3-00
Assets
Gross Block 3978.55
Net Block 2790.57
Capital WIP 66.72
Investments 454.33
Inventory 610.81
Receivables 1546.81
Other Current Assets 3673.67
Balance Sheet Total 9142.92
Liabilities
Equity Share Capital 434.12
Reserves 5815.65
Total Debt 2096.69
Creditors and Acceptances 393.91
Other current liab/prov. 402.55
Balance Sheet Total 9142.92
Let us take a look at each of its components.
Assets
Gross block is the sum total of all assets of the company valued at their cost of acquisition. This is inclusive of the depreciation that is to be charged on each asset. Net block is the gross block less accumulated depreciation on assets. Net block is actually what the asset are worth to the company.
Capital work in progress, sometimes at the end of the financial year, there is some construction or installation going on in the company, which is not complete, such installation is recorded in the books as capital work in progress because it is asset for the business.
If the company has made some investments out of its free cash, it is recorded under the head investments. Inventory is the stock of goods that a company has at any point of time. Receivables include the debtors of the company, i.e., it includes all those accounts which are to give money back to the company. Other current assets include all the assets, which can be converted into cash within a very short period of time like cash in bank etc.
Equity Share capital is the owner's equity. It is the most permanent source of finance for the company. Reserves include the free reserves of the company which are built out of the genuine profits of the company. Together they are known as net worth of the company.
Total debt includes the long term and the short debt of the company. Long term is for a longer duration, usually for a period more than 3 years like debentures. Short term debt is for a lesser duration, usually for less than a year like bank finance for working capital.
Creditors are those entities to which the company owes money. Other liabilities and provisions include all the liabilities that do not fall under any of the above heads and various provisions made.