Anshul Sadhale

Anshul Sadhale




EVERY balance sheet has 2 components -ASSETS -LIABILITIES

Assets- applications of funds. Liabilities- sources of funds. STORYTIME to understand this.

Ram wants to set up a company( Ram manufacturing) which manufactures goods but he is low on funds.

He approaches-Deep to ask for funds.

Now, he uses these funds to get equipment for manufacturing i.e he buys assets from the borrowed funds.

Ram Manufacturing owes Deep for his contribution- which becomes a liability for the Company.

Consider this- If Ram used some of his own money for buying the equipment. Would that be considered as a liability for Ram manufacturing ?

This is where in accounting , we treat the promoter(Ram) a SEPRATE entity from his company( Ram manufacturing).

So, Ram manufacturing also considers Ram’s money in addition to Deep’s as its liability.

So lets summarise - Ram has a company (Ram manufacturing) -short on funds- he approaches Deep..

Deep gives his money to Ram manufacturing.

Application of funds- money used to buy equipment. Sources of funds(borrowed money) - from Deep .

Through this thread we learnt about assets and liabilities in the simplest way possible .

Next thread will focus in depth on Assets and liabilities.

This is my attempt to learn and share through these threads for wider outreach please do like and retweet. @soicfinance @ishmohit1 @kushthakkar183 @AnsuAgarwal3 @KommawarSwapnil @Finstor85 @finshots @Fintech00 @icanseeyourpix2

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