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A balance sheet summarizes an organization or individual’s assets, equity and liabilities at a specific point in time. It gives complete picture of health of business at given point of time. It is used to understand financial health of the organization or individual. If liabilities and payment payable are less than the assets and payment receivable at given point of time then the business is in profit. Similarly liabilities or payment payable are more than the assets and payment receivable then the business in making loss.
The sample balance sheet is shown in table 3. Balance Sheet (As on ………….) If business is growing then Capital + reserve fund/deposit will grow. It should increase at 10-15% every year. If capital + reserve funds are not increasing, this means you are not progressing much. If it decreasing, this means you are spending from your capital and using it to meet recurring expenses.
Example: Balance Sheet - A Production Company’s Balance Sheet is shown in table 4. All figures are in Lakh Rs. The Balance sheets are prepared as on 31st December of each year. The Balance Sheet reveals that, the Reserve Fund is 2.5 times than the Share Capital and the sum total of Share Capital and Reserve Fund is increasing by 15% every year. This proves that the company is prospering and is able to face difficult times. Profit and loss statement Balance sheet shows health of the organization. Income statement also called as profit and loss statement (P&L) gives company’s financial statement for particular period. This shows if the organization has made profit or loss during particular period. Amount spend on fixed assets is not shown in the P & L statement. But interest on the capital invested is shown in the P & L statement. Example Mr.Sunder Patil started poultry as a side business with 100 birds. He started business with his own saving of Rs.5000/-. In the first batch of 100 birds, he incurred following expenses – Birds (102 nos) = Rs.520/- Transportation = Rs.20/- Feed 380Kg. = Rs.1216/- (Rs.3.2 /Kg) Medicine / electricity = Rs.90/-
Birds mortality = 7 Transportation cost to sale birds = Rs.30/- Labour charge = Rs.100/- Interest on capital = Rs.100/- Total expenses = Rs. 2076/- Sales Amount of birds = Number of Birds ´ (average weight Rate) = 95 ´ (1.6 ´ Rs.14/Kg ) = Rs. 2128 /- Profit = Rs.2128–Rs.2076=Rs.52/- Profit & Loss statement is shown as Total income (A) Variable cost (B) Fixed cost (C)
Match the following: A B Estimate Health of the organization Quotation Approx. estimate of price of product Cash-flow statement exact estimate of price of product Costing financial statement for particular period Balance sheet Actual expenses incurred Profit and loss statement Schedule of cash received and paid 9.7 What you have learnt In this lesson, you learnt about various types of budget, estimate, quotations, cash-flow statement etc. You also learnt about balance sheet, profit and loss statement. You studied uses of account. Quotation and Costing which helps us to assess health of the transaction. Balance sheet, profit and loss account and cash-flow statement helps to bring financial discipline to the business. This helps to make the payment of supplier, labour etc with time. It also helps in regular repayment of loan etc. 9.8 Terminal questions 1. Prepare a budget for making a Coconut Peeler, as per the contemporary rates -
Answer to intext questions
A B Estimate Approx. estimate of price of product
Quotation Exact estimate of price of product Cash-flow statement Schedule of cash received and paid Costing Actual expenses incurred Balance sheet Health of the organization Profit and loss statement financial statement for particular period
1) Estimate the Sales Value of an MS Grill having following details - Raw material - MS square bar 12 mm, Outer dimensions of the finished grill - 5' ´ 8' Grid inside - a square grid of 5 ´ 8 squares 2) Prepare a budget for the following A nursery of plants.
- a) Prepare a Moorghaas of 2000 kg - 3000 kg.
- b) Maintenance of a private or school garden.
- c) To run a Poultry farm for 25 birds.
- d) Pest control of five different crops.
- e) Run a Vermi Culture plant.
- f) Management of a Dairy farm for one month.
Study project for effects of various fertilizers on a particular crop.
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