📋 Topics Covered

• Understanding the Balance Sheet (BS)
• Classification of Assets (Current & Non-Current, Appreciating & Depreciating)
• Understanding Liabilities and Source of Funds
• Breakdown of Equity (Share Capital & Retained Earnings)
• Detailed Look at Non-Current and Current Liabilities

🧾 Balance Sheet (BS)

• A statement representing your financial position.
• A record that documents an entity’s Assets and Liabilities, offering a snapshot in time.
• It reports data from the business’s inception up to the present date.
  • Example: “Balance Sheet as of 31st March 2020” means it covers all financial history up to March 2020.

💰 Assets

Assets represent anything of value that you own.

📌 Type 1: Duration-Based Classification

🏢 Non-Current Assets

• All long-term assets (expected to be held for >1 year).
• Property, Plants, and Equipment (PP&E).
• Goodwill.
• Intangible Assets
  • Assets that you cannot physically touch.
  • Examples: Copyrights, trademarks, patents, software.
• Long-term Financial Assets.
• Other non-current assets.

💵 Current Assets

• All short-term assets (expected to be converted to cash within <1 year).
• Inventories
  • Traded Goods
  • Raw Materials & Packing Materials
  • Finished Goods
  • Spares
• Short-term Financial Assets.
• Other current assets.

📌 Type 2: Value-Based Classification

• 📈 Appreciating Assets
  • Assets that gain value over time
  • Examples: Gold, Cash equivalents (earning interest), Real Estate.
• 📉 Depreciating Assets
  • Assets that lose value over time due to wear and tear.
  • Examples: Large Machineries, Steel Plants, Cement Plants.

💳 Liabilities

Liabilities represent anything that you owe.

• It highlights the Source of funds (Paisa kahan se aaya - Where the money came from).
  • Examples: Equity, debt, bonds issued, etc.
• In a standard Balance Sheet, this section is titled Equity and Liabilities.

🏛️ Equity

Equity Share Capital

• Money raised directly from shareholders and invested into the company.

Other Equity

• Profits retained every year add up here.
• Realized Profit
  • Retained Earnings (RE): The cumulative balance of the Profit & Loss (P&L) account.
    • RE 2020 = RE 2019 + PAT 2020 - Dividends 2020 ± other adjustments
  • General / Revenue Reserve.
• Un-realized Profit
  • Capital Reserve.
  • Cash subsidy reserve, etc.

🏦 Liability Breakdown

Non-Current Liability

• Financial duties that need to be settled after 12 months.
• Financial Liability: Obligations to pay cash.
• Other Non-Current Liability: Obligations to deliver goods or perform services.
• Provisions
  • Liabilities based on estimations.
  • Examples: Compensated absences, Anniversary awards, Premature death pension schemes.
• Deferred Tax Liability (Net)
  • Often, two sets of Income Books are maintained:
    • Income Tax Book — Based on actual payment.
    • Company Accounts Book — Based on accrual/approval.
  • Example: A bonus is approved this year but paid next year.
    • If there is a taxation timing difference between these two years, it results in a different tax payable amount.
  • Net Deferred Tax can be recorded as either an Asset or Liability depending on whether tax was overpaid or underpaid in advance.

Current Liability

• Financial duties that need to be settled within 12 months.
• Short-term Financial Liability.
• Other Current Liability.
• Short-term Provisions.
• Current Tax Liabilities (Net)
  • Self-assessment tax.
  • Re-assessment (by Income Tax dept.):
    • May remain the same as self-assessment, or could increase upon review.