Balance Sheet – Finalization and Adjustments

After preparing the draft Balance Sheet, you must verify that Assets = Liabilities + Equity and make any necessary adjustments.

Common Adjustments

1. Depreciation Adjustments – Ensure accumulated depreciation is reflected in Fixed Assets.
2. Provision for Doubtful Debts – Reduce Debtors for estimated uncollectible amounts.
3. Inventory Valuation – Verify closing stock valuation (FIFO, LIFO, weighted average).
4. Revaluation of Assets – Adjust for market value changes if required.
5. Disclosure of Contingent Liabilities – Note any pending lawsuits or guarantees.

Checklist

• All Current Assets (Cash, Debtors, Stock) are listed.
• All Fixed Assets are shown net of depreciation.
• Current Liabilities (Creditors, short‑term loans) are listed.
• Long‑term Liabilities (mortgages, bonds) are listed.
• Equity includes Capital, Reserves, and Retained Earnings (adjusted for Net Profit/Loss).
• Totals balance.

Example Adjustment

Assume Debtors of ₹80,000 with an estimated 5% doubtful amount.

• Provision: 5% of 80,000 = ₹4,000.
• Adjusted Debtors: 80,000 – 4,000 = ₹76,000.
• Add a line under Current Assets: "Provision for Doubtful Debts – ₹4,000 (Disclosure)".

Final Presentation

Quiz

💡 Final Wisdom: "A balanced sheet is a sign of sound accounting – double‑check every adjustment and disclose anything that could affect stakeholders."