A company prepares a balance sheet only after completing both trading accounts and profit and loss accounts. The balance sheet clearly notifies the current state of assets as against total liabilities. Inside the liability, company’s capital used as necessary expenditure will also reflect. A capital receipt is issued against it.
Both credit and debit sides of the balance sheet will be measured and equated at the end. If the equation isn’t matched then there must be some wrong entry that needs to be fixed. Usually the total of assets in any firm found in a certain time period will be equal to the sum of total liabilities and capital. The liabilities of any company will definitely consist of two important aspects such as the proprietor’s equity and the equity of the creditors.
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