The main objectives of preparing balance sheet can be described as follows:
1. To Reveal The Financial Position
The main purpose of preparing balance sheet is to know the short term and long term financial position of the firm.
2. To Show The Picture Of Assets And Liabilities
Balance is prepared to know the value of assets and liabilities of the company at the end of the year.
3. Information About Debtors And Creditors
Balance sheet provides true picture of trade debtors and creditors for the specific period.
4. To Reveal Liquidity Position
Balance sheet shows the liquidity position of the firm.
5. To Show Solvency Position
Balance sheet helps to know the solvency position of the business.
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6. To Calculate Ratios
Accounting ratios are calculated on the basis of data provided by balance sheet. It helps the management to know the strength and weakness of the business.
7. To Provide Financial Information
Balance sheet provides true and reliable financial information to the management, government, shareholders, lenders etc.
