Commercial Applications
Answer
The five main uses of Balance Sheet for a non-trading organisation are as follows:
Shows the assets of the organisation — The Balance Sheet lists all the assets owned by a non-trading organisation — fixed assets (like building, furniture), investments and current assets (like cash, prepaid expenses).
Reveals the liabilities of the organisation — It shows the obligations of the organisation — outstanding expenses, subscriptions received in advance, creditors, bank overdraft, prize fund, building fund, etc.
Depicts the Capital Fund — The Balance Sheet shows the Capital Fund (the accumulated wealth of the organisation), plus the surplus from the Income and Expenditure Account.
Shows the financial position — By presenting assets, liabilities and Capital Fund together, the Balance Sheet depicts the overall financial position of the organisation.
Fulfils statutory requirements — Non-trading organisations are legally required to prepare a Balance Sheet under various statutes such as the Cooperative Societies Act and the Societies Registration Act.