A balance sheet is an accounting statement prepared from accounting balances at a given date. It shows the financial position of a business by detailing the sources of funds and the utilization of these funds. A balance sheet shows the assets and liabilities grouped, properly classified and arranged in a specific manner.
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It has already been stated that after the preparation of trial balance, some accounts are closed by transferring them to the Trading account and some accounts are closed by transferring to Profit & Loss Account. These accounts are in the nature of expenses and revenues.