Deriving information relating to changes from two balance sheets

From two balance sheets, we can derive the data relating to the changes that have occurred in relation to the various balance sheet items over the period between the two dates.

The figures representing the changes in the balance sheet items are not straight away available but are to be derived.

Changes in the Current Area

Changes in the current area can be assessed by taking into consideration only the current natured accounts, both on the assets as well as the liabilities side i.e. current assets and current liabilities only.
Name Type Balance as on 31st March Change Nature
2007 2008
Cash Balance
Bills Receivable
Sundry Debtors
Stocks/Inventories
Prepaid Expenses
Sundry Creditors
Bills Payable
Bank Overdraft
Outstanding Expenses
Provision for Taxation
Provision for Dividends
Reserve for Bad Debts
Asset
Asset
Asset
Asset
Asset
Liability
Liability
Liability
Liability
Liability
Liability
Liability
56,000
5,75,000
9,15,000
9,48,000
3,24,000
7,40,000
2,20,000
2,81,000
1,23,000
2,38,000
1,98,000
18,000
78,000
8,25,000
12,25,000
12,00,000
2,84,000
11,00,000
4,00,000
2,50,000
1,00,000
3,00,000
2,50,000
12,000
22,000
2,50,000
3,10,000
2,52,000
40,000
3,60,000
1,80,000
31,000
23,000
62,000
52,000
6,000
Increase
Increase
Increase
Increase
Decrease
Increase
Increase
Decrease
Decrease
Increase
Increase
Decrease

Bad Debt reserve is current natured and is also a reserve

Reserve for Bad Debts account carries a credit balance. Being related to sundry debtors which are current natured, it is also treated as a current natured account.

Ledger accounts with a credit balance which appear in the balance sheet are shown on the liabilities side. As such, Reserve for Bad Debts account should also be shown on the liabilities side of the balance sheet and since it is current natured it is shown along with current liabilities.

Showing an item on the liabilities side of the balance sheet is the same as deducting it from an item on the assets side of the balance sheet. Thus to derive the information relating to the net realisable debtors, conventionally we deduct the reserve for bad debts from the figure of debtors on the assets side of the balance sheet.

Changes in the Non-Current Area

Changes in the fund area can be assessed by taking into consideration only the fund natured accounts, both on the assets as well as the liabilities side i.e. fund (non-current) assets and fund (non-current) liabilities only.
Name Type Balance as on 31st March Change Nature
2007 2008
Equity Share Capital
Preference Share Capital
Reserves
Long Term Liabilities
Fixed Assets
Accumulated Losses
Liability
Liability
Liability
Liability
Assets
Assets
12,00,000
7,00,000
20,00,000
15,00,000
37,00,000
7,00,000
15,00,000
9,00,000
23,00,000
16,00,000
45,00,000
6,00,000
3,00,000
2,00,000
3,00,000
1,00,000
8,00,000
1,00,000
Increase
Increase
Increase
Increase
Increase
Decrease

Note that the information that is derived only speaks of the magnitude of change and the direction of change. It does not give us an idea of the reasons for change.

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