CA Satish Sarda
Can you answer these questions easily? What is your net worth? How much you have invested in Immovable Property? What is your share holding? What is your loan outstanding? How much have you advanced to your friends and relatives? How much and from whom have you borrowed ? What is your yearly insurance premium? How much you have invested in precious metals? And the most important How much is your cash in hand? Most of the Individuals will answer in negative!!!
Generally Balance Sheet is prepared by business concerns like Proprietorship Firm, Partnership Firm, Company, LLP, Co-operative Society. It is prepared for following reasons : to know the Financial condition , status of the concern , to calculate different taxes , for business deals , for different stake holders such as Shareholders, Bankers , Financial Institutions, Vendors , clients etc. Mostly they prepare financial statements such as Balance Sheet, Profit & Loss Account, Cash Flow Statements for the financial year i.e. April to March.
But Individuals generally do not maintain their accounts and as such do not prepare their Balance Sheets. A balance sheet can give an exact positions of one’s Assets , Liabilities, Capital , Income , Expenses etc. You can be a Businessman, an employee, an Investor, A sportsman, a Singer, An Artist, A Politician any one. You may be having income from any source such as Salary , Business, Profession, Vocation, Investment etc. and have to spend on various issues such as Purchasing a house, Vehicles, Marriages ,Education , medical ,Food, entertainment , travel, Investment etc. To keep a track of all these is very difficult task. But all these can be very conveniently recorded through accounting and preparation of periodical Balance Sheet.
You can keep accounts manually or through accounting software. An individual can easily maintain accounts manually by regularly writing cash and banking transactions in a cash book. And from it they can prepare ledger accounts. Individuals having large number of transactions can take help of a CA , Tax Consultant or part time accountants to maintain their accounts.
Information pertaining to an Individual is required on various occasions such as obtaining a loan from bank, providing guarantees , filing of income tax ,wealth tax returns, family partitions, drafting and execution of wills etc. If you are not preparing your balance sheet then you give such information on very csula or estimate basis which may lend you in trouble.
In case of Income tax investigations like scrutiny, survey , search by Income tax department you have to provide correct information regarding your assets , Investments ,income, expenditure etc. You may have to pay a heavy price if you fail to satisfy their queries . You can very easily answer their questions if you have your balance sheets with you.
It is said that We all are born with our janam kundali…right or wrong I do not know but we can have our Jeevan Kundali by way of Balance Sheet !!
So know thy self….!! And let the world know…!! ( financially atleast ) . Prepare your Balance Sheet.
(Author is a Past Chairman-Nagpur Branch Of ICAI)
Do you think CBDT should extend Tax Audit Report and relevant ITR Due Date? Please Comment, Vote, Retweet and Like.— Tax Guru (@taxguru_in) September 18, 2018