Page 155 - Account 10

ii. Bank Overdraft
It is a kind of facility provided by the banks to their clients to withdraw money from
the banks in excess than their deposit against some security deposit or as the faith and
confidence. This facility is not allowed to every client but only to some prestigious and
regular clients for a short period (mostly of 90 days term) Since, it is to be repaid to the bank
within the specified period, it is regarded as a current or short-term liability for the firm.
iii. Reserve Fund
Future is uncertain; thus, any contingent event may take place in the future. In order
to cover up the financial loss in the future caused by the uncertain incidents, a fund is
created from out of profit each year. Such a fund is known as reserve fund. If it is created
for general purpose, it is called general reserve. But if it is created for a particular purpose,
it is known as specific fund. A specific fund cannot be used in other situation rather than
for the specific incident. Since reserves are created from profit, it is associated with capital.

iv. Bills Receivables and Payable
The person or firm, who is entitled to receive money, draws a bill and gets it accepted
from the person who is liable to pay the bill. As such, a bill is created between two parties
and the same bill is bills receivables (B/R) to the former and bills payables (B/P) to the
latter. Thus, from the drawer’s point of view, it is bills receivable, an asset to him and
from the acceptor’s point of view, it is bills payable, a liability to him.

14. Specimen and Preparation of Balance Sheet
Balance Sheet of .................. Co.
As on ...............
Capital & Liabilities Amount Assets Amount
Capital .......... Fixtures and Fittings ..........
Add: Interest on Capital .......... Freehold Land ..........
Add: Net profit .......... Land and Building ..........
(Less Net loss) .......... Plant and Machinery ..........
(Less: Drawing) .......... .......... Furniture and Fitting ..........
Development fund .......... Motor Vehicles ..........
Pension fund .......... Business/ Office Premises ..........
Sinking fund .......... Factory shed ..........
Reserve fund .......... Lease holds ..........
General reserve .......... Livestock ..........
Specific reserve .......... Tools and equipments ..........
Mortgage loan .......... Cart and horses ..........
Retained earning .......... Lorries ..........
Loan .......... Railway sidings ..........
Secured loan .......... Goodwill ..........
Unsecured loan .......... Patents right ..........
Debenture .......... Copyright ..........
Bond .......... Trade mark ..........
Long term loan .......... Investment ..........

154 Aakar’s Office Practice and Accountancy - 10 Final Accounts 155