Every publicly listed company in India is required to publish its balance sheet under the Companies Act, 2013. Yet most investors and students find this document confusing because it mixes accounting jargon with unfamiliar Hindi terminology. This guide breaks down the balance sheet format, the fundamental accounting equation, and every line item — so you can read any company's financial position in minutes.
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What Is a Balance Sheet?
A balance sheet is a financial statement that reports a company's total assets, liabilities, and shareholders' equity at a specific point in time. It provides a snapshot of what a company owns, what it owes, and how much has been invested by shareholders. The balance sheet is one of three core financial statements alongside the income statement (profit and loss account) and the cash flow statement.
The fundamental accounting equation that every balance sheet must satisfy is:
Assets = Liabilities + Shareholders' Equity
This equation must always balance — the total value on the left side equals the total value on the right side. If it does not balance, there is an accounting error.
Balance Sheet Format (Indian Companies Act)
Under Schedule III of the Companies Act, 2013, every Indian company must present its balance sheet in either the horizontal or vertical format. The vertical format is the most commonly used today. The two main sides are:
- Equity and Liabilities (sources of funds)
- Assets (uses of funds)
Equity and Liabilities Side
This side answers the question: where did the company get its money?
Share Capital
Share capital represents the money raised by issuing shares to investors.
| Item | Hindi Term | Description |
|---|---|---|
| Equity Share Capital | Samta Ansh Punji | Ordinary shares held by common shareholders |
| Preference Share Capital | Purvadhikar Ansh Punji | Shares with priority dividend rights |
Reserves and Surplus
Reserves are profits retained by the company instead of distributing them as dividends.
| Item | Hindi Term | Description |
|---|---|---|
| General Reserve | Samanya Sanchit | Profits set aside for general use |
| Capital Reserve | Punji Sanchit | Gains from non-operating activities |
| Profit and Loss (Credit) | Labh-Hani Jama | Accumulated undistributed profits |
| Securities Premium | Pratimoorti Prabyaj | Premium collected above face value of shares |
| Share Forfeiture Account | Anshon Ka Haran | Amount retained from forfeited shares |
Secured Loans (Non-Current Liabilities)
| Item | Hindi Term | Description |
|---|---|---|
| Debentures | Rinpatra | Long-term debt securities issued to investors |
| Bonds | Bandhan | Fixed-income instruments with maturity dates |
| Bank Loan | Adhikosh Rin | Term loans from banks with collateral |
| Mortgage Loan | Bandhak Rin | Loans secured against property |
Current Liabilities
Current liabilities are obligations due within one financial year.
| Item | Hindi Term | Description |
|---|---|---|
| Creditors (Trade Payables) | Lendaar | Amounts owed to suppliers |
| Bills Payable | Deya Vipatra | Written promises to pay at a future date |
| Bank Overdraft | Bank Adhivikrash | Short-term borrowing from bank |
| Outstanding Expenses | Adatt Vyay | Expenses incurred but not yet paid |
| Advance Income | Agrim Aay | Revenue received before service is delivered |
Provisions
| Item | Hindi Term | Description |
|---|---|---|
| Provision for Bad Debts | Aprapya Rin Pravdhan | Reserve for debts unlikely to be collected |
| Provision for Taxation | Kar Pravdhan | Reserve for estimated tax liability |
| Provision for Repairs | Marammat Pravdhan | Reserve for future maintenance costs |
Assets Side
This side answers the question: where has the company deployed its money?
Fixed Assets (Non-Current Assets)
Fixed assets are long-term resources owned by the company for more than one year.
| Item | Description |
|---|---|
| Land and Building | Real estate owned by the company |
| Plant and Machinery | Manufacturing equipment and production lines |
| Furniture and Fixtures | Office furniture, fittings, and installations |
| Loose Tools | Small tools and implements |
| Goodwill | Premium paid for acquiring another business |
| Patent Rights | Exclusive rights to an invention |
| Trade Marks | Registered brand names and logos |
Current Assets
Current assets are resources that can be converted into cash within one financial year.
| Item | Description |
|---|---|
| Cash | Physical currency held by the company |
| Bank Balance | Funds in the company's bank accounts |
| Debtors (Trade Receivables) | Amounts owed by customers |
| Bills Receivable | Written promises from customers to pay |
| Investments | Short-term securities and deposits |
| Stock (Inventory) | Raw materials, work-in-progress, and finished goods |
| Prepaid Expenses | Payments made in advance for future services |
| Accrued Income | Revenue earned but not yet received |
Miscellaneous Expenditure
| Item | Hindi Term |
|---|---|
| Preliminary Expenses | Prarambhik Vyay |
| Discount on Issue of Shares | Anshon Ke Nirgaman Par Katauti |
| Discount on Issue of Debentures | Rinpatron Ke Nirgaman Par Katauti |
| Profit and Loss (Debit) | Accumulated losses carried forward |
How to Read a Balance Sheet: Practical Example
Consider a small company with the following figures (in Rs. Lakhs):
| Equity and Liabilities | Amount | Assets | Amount |
|---|---|---|---|
| Share Capital | 50.00 | Land and Building | 40.00 |
| General Reserve | 15.00 | Plant and Machinery | 25.00 |
| Bank Loan (Secured) | 30.00 | Stock | 12.00 |
| Creditors | 8.00 | Debtors | 18.00 |
| Outstanding Expenses | 2.00 | Cash and Bank | 10.00 |
| Total | 105.00 | Total | 105.00 |
Both sides total Rs. 105 Lakhs, confirming the accounting equation is satisfied. This company has Rs. 65 Lakhs in fixed assets, Rs. 40 Lakhs in current assets, and Rs. 40 Lakhs in external liabilities.
Key Financial Ratios from the Balance Sheet
| Ratio | Formula | What It Tells You |
|---|---|---|
| Current Ratio | Current Assets / Current Liabilities | Ability to pay short-term debts (ideal: above 2:1) |
| Debt-to-Equity Ratio | Total Debt / Shareholders' Equity | Financial leverage (lower is safer) |
| Return on Equity (ROE) | Net Profit / Shareholders' Equity | Efficiency of equity capital usage |
| Working Capital | Current Assets - Current Liabilities | Operational liquidity available |
For tracking live market data related to company financials, refer to the Nifty 50 daily market outlook and the Repo Rate and RBI policy guide.
