Asset Liability Statement Format: Fill & Download for Free

1. Financial vs. Managerial: Accounting has two main disciplines: managerial is the one you use internally for keeping track of things and financial is the one you present externally to investors, banks and the government. For instance, in your managerial accounting you will enter the day-to-day expenses and sales, while your financial accounting will be a summary of all those transactions.2. Double entry book-keeping: Every transaction must be entered in two accounts and these must eventually balance. This ensures that you are on the right track. Although accounting is as old as human civilization, double entry book-keeping was invented only in the 14th century. Fundamentally, all an accountant does is balance the books - make sure all the transactions are entered in two accounts and they all eventually balance (like the last line in the image below).3. Assets & Liabilities. These are the foundations of accounting. Assets include everything you own - your home, car, factory, equipments are all your assets. Liabilities include everything you owe - this includes all your loans. A lot of transactions involve increasing both. For instance, when you buy a home with a loan, you increase both your assets and liabilities.4. Equity. The gap between assets and liabilities is your fundamental worth - equity. For instance, if you own a car worth $10,000 and your auto loan balance is only $3000, your equity on the car is $10,000 - $3000 = $7000. If your overall equity is less than zero, that means you are broke.Equity = Assets - Liabilities5. Credit vs. Debit. This is the yin & yang of accounting system. Credit (Cr) is an entry that increases your liabilities and debit (Dr) is an entry that increases your assets. Debit in general means adding a positive number to an account and Credit in general means adding a negative number. Credit is traditionally written on the right side of a ledger, and debit is usually written on the left side of a ledger.6. Ledger. The image that you see above is a part of a ledger. A ledger is a principal book, where you enter the money transactions in the format above. Companies typically keep 3 types of ledgers: General Ledger - for keeping track of all expenses, income, assets, liabilities and equity, Sales Ledger - for keeping track of customers who have purchases, but not yet paid for their goods and Purchase Ledger - for keeping track of all purchases we have made for which we have not paid yet.From the ledger, we create financial statements that summarize a company's overall position. International standards mandate companies to keep four main types of financial statements. See: Financial statement7. Balance sheet - This is the snapshot of a business. It states how much assets are there in various categories (bank accounts, buildings, equipments and the amount you need to receive from your customers), how much liabilities are there in various categories (short term loans, long term loans, amount you need to pay your suppliers) and the overall ownership equity - how many shares of the company are held and how much money was got from the owners.8. Income statement - This records the incomes and expenses in various categories. For instance, following is a part of Coca Cola's income statement. http://www.thecoca-colacompany.com/investors/pdfs/form_10K_2011.pdf You can see that they have made $46,542 million (top line) in 2011 and are left with a profit of $8634 million (bottom line). Given that the profits are written in the bottomline, you have this common expression bottomline that refers to the final results, while topline is used to show the overall sales that a company makes.9. Cash flow statement - If you have run a business, you know that cash is the king & it is very important to understand how a business manages its cash. For instance, if you have made a sales of $10 million, but none of your customers have repayed yet, you can no longer afford to be happy that you have made $10 million in sales. The cash flow statement records how a company got and spent its cash. The cash flow statement shows whether the company is growing its cash and how it is spending the cash (new equipments, repaying loans, paying more wages, etc).10. Accounting is not an exact science. Accounting, contrary to popular perception, is not an exact science but involves a lot of judgment. For instance, if 3 of your customers have not paid in 6 months, you must decide if you have to keep them in the account receivable or write it off. Also, you are required to understand tax policies, how inventories are increasing/decreasing in prices and what is the lifetime of the assets you are own.See more: Basic Accounting Concepts | AccountingCoach.comWikipedia: AccountancyRelated:Balaji Viswanathan (பாலாஜி விஸ்வநாதன்)'s answer to What should everyone know about investing?What should everyone know about economics? Which websites or books do you suggest for someone dipping their toe into the subject?Balaji Viswanathan (பாலாஜி விஸ்வநாதன்)'s answer to How does the stock market work? Who decides the price of stocks? What is the logic behind the valuation of stocks?

Standalone financial statements show the financial position of the company alone (and no other legal entity). Consolidated financial statements show the financial position of the company itself along with it’s subsidiary companies, associate companies and joint ventures.Therefore, when you look at the consolidated financial statements, you are looking at the financial position of a group of companies - taken together. In this context, there are some questions that we should go through, to be able to understand the concept of consolidated financial statements.#1] What are subsidiaries, associates and joint ventures?A subsidiary is a company that you control - normally by owning more than 50% of the shares or by controlling the board of directors.An associate is a company on which you exercise significant influence - this would mean less than control but still enough influence to control their decisions; a thumb rule of minimum 20% holding is considered for this (less than 50%, of course).A joint venture is not entirely controlled by you, but you jointly control the assets, operations or the resources of the venture.When an entity prepares a consolidated financial statements, it includes not only the financial information of the company itself, but also of the above types of companies that are included in the financial statements.#2] When does a company have to prepare consolidated financial statements?In India (since that’s the region the question is about), preparation of Consolidated Financial Statements is mandatory for listed companies or public companies that have a subsidiary, associate or a joint venture. Obviously, if you have no such company, then consolidated statements are meaningless.However, the company is not mandated to release all the financial information every quarter. In order to understand which information is mandatory and which is optional, you can check out this detailed list of SEBI guidelines.In the question description you mention that Reliance does not provide this data quarterly. That’s not true. If you see the quarterly financial results of Reliance Industries Limited, you will find both consolidated as well as standalone results over there. Like I said, it is mandatory for listed companies.When a company prepares consolidated financial statements, they have to follow the relevant accounting standards.#3] How are consolidated financial statements prepared?The basic idea is that financial information shown in the consolidated statements should include information about the subsidiaries, associates and JVs also. But each of these are treated differently. Here’s how:Subsidiaries - all the assets, liabilities, incomes and expenditures of the subsidiaries are completely added to the assets, liabilities etc of the holding company. So, even if you own 75% of the shares, your balance sheet will reflect 100% of the assets of your subsidiary. The balancing figure (25% that you don’t own) will be subtracted from equity, as “minority interest”).Joint ventures - all the assets, liabilities, incomes and expenditures are proportionately added to the assets, liabilities of the holding company. For example, if you own 51% of the joint venture, then the assets will be added only to the extent of 51% of the JV.Associates - usually, associates are consolidated using the equity method, which means that the individual assets, liabilities etc. of the associate will not be added to the consolidated financial statements, but the “value” of the investment in that associates will be revised to include the proportionate value of the associate that you own.Really, this is too technical. I cannot simplify this further if you don’t know the basics of accounting. But remember that the method of consolidation is different for these three, and there are laid out standards for the same.#4] Is this data important for the investors?Yes, it is.Investors have invested their money in the associate, subsidiary or the JV. Hence, they need to know whether it makes sense to continue that investment or not. As such, a company is therefore required to disclose to their shareholders the financial results that we get from these investments.Presenting it separately would not add much value. Preparing consolidated financial statements helps to reflect the true value of those investments and the correct impact they have on the financial statements of the company. So, obviously it is a very helpful information for the investors. Which is why it is mandatory for public listed companies in India to release consolidated financial statements.

A balance sheet is one of the components of the financial statements which represents the financial condition of the company. It talks about economic resources and claims against the company.It consists of Assets on one side. Liabilities and Equity on the other. In a generic sense, what it says is, how much of my own money have I put into the company (equity) and how much of it is through borrowing and debt (liabilities).How have I used the money I have with me (equity and debt) in order to buy the assets? Hence, Assets = Liabilities + Equity.