Page 107 - Office Practice and Accounting 10

2. Liabilities

i. Capital: Capital is the sum of assets invested in business. Net profit and interest
on capital increases the capital whereas net loss and drawing decreases the
capital. Capital is also known as shareholder’s equity.
ii Fixed or long-term liabilities: Those financial liabilities which are to be paid
after long period of time, generally more than one year, are called long term
liabilities. Bank loan, debentures, mortgage, bond are long-term liabilities.
iii. Current liabilities: Those financial liabilities which are to be paid within
a year are called current liabilities. Creditors, bank overdraft, all payables,
outstanding expenses, income received in advance, provision for taxation,
proposed dividend, short-term loan etc. are current liabilities.

Specimen of Balance Sheet

Balance Sheet of ............
As on ................

Liabilities Assets Liabilities Assets
Capital xxx Goodwill xxx
Add: Net profit xxx Land and Building xxx
Less: Net loss xxx Plant and Machinery xxx
Less: Drawing xxx Leasehold premises xxx
Add: Additional Capital xxx Furniture and fixture xxx
Add: Interest on Capital xxx xxx Patent, copyright, Trade mark xxx
General Reserve xxx Live stock, vehicles xxx
Reserve fund xxx Investment xxx
Other reserve xxx Closing stock xxx
Debenture xxx Cash in hand xxx
Mortgage Loan xxx Cash at bank xxx
Long term loan xxx Debtors xxx
Bank overdraft xxx Bills receivable xxx
Creditors xxx Prepaid expenses xxx
Bills payable xxx
Received in advance xxx
Outstanding expenses xxx
Provision for Taxation xxx
Total xxx Total xxx

Office Practice and Accounting 10 101