explain how a balance sheet is prepared under double accounting system
Hello aspirant,
There are 4 parts for the drafting of final accounts in double account system. They are:
(1) Revenue Account:- It relates with the normal Profit and Loss Account (prepared under Single Account System) where the expenses are collected under appropriate heading. All items of expenditure appear on the debit side and all items of income appear on the credit side of Revenue Account.
(2) Net Revenue Account:- It relates with the ordinary Profit and Loss Appropriation Account of a trading purpose made under Single Account System. Interest on loan and Interest on debentures are written on the debit side of the Net Revenue Account, i.e., treated as an appropriation of profit since debentures and loans (long-term) are considered as a part of capital. In short, in Single Account System, such interest is made against profit, hence, debited to Profit and Loss Account.
(3) Capital Account:- The use of this account is to show the sources of total capital and the application of the same in various fixed assets. It has expenditure of a capital in the left hand side (or debit side) including additions to fixed assets. Three columns are used for the purpose—the first column gives the expenditure on each item at the end of last year, the second one shows the additions which are made for the current year, and the third column has the total capital expenditure to date.
(4) General Balance Sheet:- This is actually the second part of the Balance Sheet which has current assets and current liabilities together with the balance or totals of each side (as the case may be) of capital account. Some other items, e.g., any kind of reserve, say, General Reserve, Capital Reserve etc., or any kind of funds, e.g., Depreciation Fund, etc., also will be shown in the Balance Sheet. The assets are written in the right hand side (asset side) and liabilities are written in the left hand side (liabilities side), i.e., it is made in its usual form.
Hope this helps,
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