What is a Balance Sheet?
A Balance Sheet is a financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific time. It’s called a balance sheet because the two sides balance out. A company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (equity). These 3 segments give investors an idea about what the company owns and owes, as well as the amount invested by the shareholders.
What are the types of items which appear under the liabilities side of a balance sheet?
Items such as:
- Sundry Creditors
- Long Term Liabilities
- Advances from Customers
- Loan from bank
- Outstanding Expenses
- Current Liabilities
- Income received in Advance
What are the types of items which appear under the assets side of a balance sheet?
- Bank Balance
- Sundry Debtors
- Prepaid Expenses
- Cash Balance
Why do we need a Balance Sheet?
We can use this report to get a complete picture of the financial results and financial position of a business on the last date of the financial year. A balance sheet records the flow of money in a business and it shows the accounting value of all the company’s assets, liabilities and equity at one time. Therefore, this may all lead to conclusions about the entity’s liquidity.
One or more auditors must examine the balance sheets. You must then submit these documents for adoption to a general meeting within 4 months after its date. The officer must give a copy to every person entered in the register of shareholders at least 3 days before the general meeting. Copies must also be kept open at the offices of the company during the same period for inspection by the shareholders.
In case of loss or damage of the accounts or the relevant documents, the person in-charged shall notify the Accounts Inspector. The responsible officer must report within 15 days from the date of knowing about the loss or damage.
What happens upon failure to submit the audited financial statement on time?
You need to file the company’s annual financial statements and Annual Income Tax Return with the Revenue Department and Department of Business Development, within 150 days after the end of its accounting period. If a company fails to submit within the required time, the company and/or its responsible officer is liable to a certain penalty or fine.
Can a company change its year-cycle of account?
A company can change its accounting period by getting a written approval from the Revenue Department. They must submit Form SorBorChor4 together with other documents specified in the mentioned form.
Please See Related FAQ under Accounting