VAE 511: Livestock Entrepreneurship (1+0)

BALANCE SHEET

• A balance sheet is a summary statement of all the assets and liabilities of a business at a given point of time.
• To be precise, it presents the net value of assets and liabilities in a concise form at a given time and is usually prepared towards the end of the financial year.
• Balance sheet is also known as Net Worth statement.
• In a typical Balance sheet, the assets are listed on the left hand side and liabilities are listed on the right hand side.
• Apart from this, at the bottom of right hand side of balance sheet Net worth or Equity is mentioned.
• Generally the left hand side values are equal or balances the right hand side values and hence this statement is called as Balance sheet.

An Asset may be defined as a property which a farmer/firm owns. A Liability is the amount of money owed by the farmer/firm to others. On the basis of liquidity, assets/liabilities are classified into

• Current assets
  • The assets which are used up in one production cycle and which can be easily converted into cash.
  • Eg. Cash on hand, accounts receivable, market securities, inventories etc.,
• Medium term assets
  • The assets which are used up in production process for more than one year and upto 5 years.
  • Eg. Animals, equipments etc.,
• Fixed assets
  • The assets which are used up in production process over a long period and which cannot be easily converted into cash.
  • Eg. Land, buildings, machinery etc.,
• Current Liabilities
  • They refer to short time commitments of the business/farmer which has to be repaid within the current year.
  • Eg. Accounts payable, taxes payable, interest payable.
• Working/Medium term loans
  • They refer to commitments of the business farmer which could be deferred at present but the due falls in the next season and their time period ranges from 1 – 5 years.
  • Eg. Medium term loans for Animals or small machinery such as chaff cutter loans etc.,
• Deferred Liabilities
  • They refer to long term loans and other such commitments which could be repaid over a period of 5-15 years.
  • Eg. Long term loans for land, feed mill, hatchery etc., .
• Net Worth/Equity
• It is the difference between the total assets and total liabilities in the business.
• The most liquid current asset is cash in hand and the least liquid current asset is inventory.Eg. Milk can.
• The most liquid current liability is money at call and the least liquid asset is long term loans.

Model of balance sheet

Assumptions

• An entrepreneur has a land of 2 acres, worth of Rs.500000/- He has khoa producing unit worth of Rs.50000/- In his current account in Indian Bank he has Rs. 25000/- Taxes payable for this year is Rs. 20000/- Wealth tax is Rs. 5000/- He borrowed Rs. 10000/- from his neighbour. He has inventory worth of Rs.30000/- He has ice cream mix unit worth of Rs. 100000/- He has bank deposit of Rs.25000/- He bought loan from bank which must be paid within 3 years. He also borrowed loan for land development of Rs. 200000/-.
  

Balance sheet of Dairy processing unit business as on -
Liabilities	Amount in Rs.	Assets	Amount in Rs.
Current Liability		Current assets
1. Taxes payable	20000	1. Current account balance	25000
2. Wealth tax	5000	2. Inventories	30000
3. Neighbour borrowing	10000	3. Bank deposit	25000
	35000		80000
Medium term liability		Working assets
1. Bank loan	100000	1. Khoa unit	50000
		2. Ice cream unit	100000
	100000		150000
Long term Liability		Fixed assets
1. Land development loan	200000	1. Land	500000
	200000		500000
Total Liability	335000	Total Assets	730000
Networth = Total Assets – Total Liability = Rs. 395000/-