How to Read the Balance Sheet of a Company - Part 3

In the 2nd part of "How to Read the Balance Sheet of a Company -part 2?" we have taught deeply about the asset, so you can read it and understand it. In this part, we will teach you the reading of liabilities of balance sheet. 

(A)  Fixed Liabilities 

All the long term liabilities which carry the money from our pocket will be our fixed liabilities. 

1. Secured Long Term Liabilities 

All the liabilities will include in secured long term loan which is taken more than one year and for pledge, we have given our assets. For example, A company has the investment of Rs. 4 Lakh and it takes the loan from its DEMAT account under the limit of Rs. 3,00,000 for investing more. So, it is the secured liability of A company. If we as company A did not pay, we can not sell our asset of Rs. 4,00,000. 

2. Unsecured Long Term Liabilities 

Simple other example is company's bond and debenture which is unsecured and company did not pledge any his property against this. 

3. Share Capital 

Share capital is the liability of company. Because it is payable to the shareholder of company who invest in the company. 

For example A company has issued 1000 shares @ 100 Rs. per share. It is share capital of Rs. 1,00,000 which will show in the balance sheet of A company as liability

4. Reserve and Surplus

Company does not pay all his earning in the form of dividend. It may be paid 25% or any or reserve balance Rs. 75% in his pocket. It is the liability of company and shows in the liability side of company at the time when there is end of company, it must be paid to company shareholders.

B. Current Liabilities 

All current liabilities which are not fixed liability and which is payable within one year. 

1. Bank Overdraft

It is unsecured loan taken from bank and payable within one year. 

2. Trade Payable/ account Payable

If we bought inventory on credit, it will our liability because we have to pay to creditor and it will show in the balance sheet under current liability head 

Download Balance sheet MADE Easy at here.