A balance sheet may be defined as "a statement prepared with a view to measure the exact financial position of a business

on a certain date. "It is prepared from the trial balance after all the balances of nominal accounts are transferred to trading and profit and loss account and corresponding accounts in the ledger are closed. The balances now left in the trial balance are either personal or real accounts. In other words, they either represent assets or liabilities existing on the date of closing of accounts. All these assets and liabilities are displayed in the balance sheet according to certain principles such as : (a) All real and personal account having debit balances should be shown on the assets side of balance sheet which is on the right-hand side. (b) All the real and personal account having credit balances should be shown on the liabilities side of balance sheet, which is on the left-hand side. The excess of assets over liabilities represents the capital of the owner. This figure of capital must tally with the closing balance of capital account in the ledger after the net profit or loss has been transferred therein. It shows that when real and personal accounts are placed on the opposite sides of balance sheet according to the nature of balances, the assets side should be equal to liabilities side. As stated earlier and personal accounts having debit balances are called assets; actually at trader's property and possessions as also the debts owing to him (sundry debtors and bills receivable) are assets. The real and personal accounts having credit balances along with owner's capital are shown as liabilities. So liabilities are the debts owing by a business to third parties and the owner of the business.
The order in which assets and liabilities are stated on the balance sheet is known as marshalling.

Pro-Forma Balance Sheet

XYZ Corporation
For the year 2008 to 2011

ASSETS Current Assets Cash Net accounts receivable Inventory Temporary investment Prepaid expenses Total Current Assets Fixed Assets Long-term investments Land Buildings (net of depreciation) Plant & equipment (net) Furniture & fixtures (net) Total Net Fixed Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts payable Short-term notes Current portion of long-term notes Accruals & other payables Total Current Liabilities Long-term Liabilities Mortgage Other long-term liabilities Total Long-term Liabilities SHAREHOLDERS' EQUITY Capital stock Retained earnings Total Shareholders' Equity TOTAL LIABILITIES & EQUITY

2008 XX XX XX XX XX XX

2009 XX XX XX XX XX XX

2010 XX XX XX XX XX XX

2011 XX XX XX XX XX XX

XX XX XXX XXX XX XXXX XXXX

XX XX XX XX XX XXXX XXXX

XX XX XX XX XX XXXX XXXX

XX XX XX XX XX XXXX XXX

XX XX XX XX XXX

XX XX XX XX XXX

XX XX XX XX XXX

XX XX XX XX XXX

XX XX XXXX

XX XX XXXX

XX XX XXXX

XX XX XXXX

XX XX XXXX XXXX

XX XX XXXX XXXX

XX XX XXXX XXXX

XX XX XXXX XXXX