Step 1: Liabilities (What
business owes)
Ø Capital Account:
Owner’s investment in the business.
Ø Current Liabilities:
Short-term debts payable within one year.
Ø Accounts Payable:
Amount owed to suppliers for purchases.
Ø Duties & Taxes:
Taxes payable to the government.
Ø Loans & Liabilities:
Long-term borrowings or financial obligations.
Ø Profit & Loss Account:
Accumulated profit or loss of the business.
Ø Opening Balance (P&L):
Previous period’s profit or loss.
Ø Current Period (P&L):
Profit earned in the current period.
Ø Total (Liabilities):
Total amount the business owes.
Step 2: Assets
(What business owns)
Ø Current Assets:
Assets easily converted into cash within one year.
Ø Closing Stock:
Unsold goods value at the end of the period.
Ø Bank:
Money available in bank accounts.
Ø Cash:
Physical cash in hand.
Ø Accounts Receivable:
Money to be received from customers.
Ø Fixed Assets:
Long-term assets like land, building, machinery.
Ø Total (Assets):
Total value of what the business owns.