Explanation of Mr X and Y's Balance Sheet

Introduction: Mr X and Y are partners who share profit and losses in the ratio of 4:1. Their balance sheet as on 31 March 2015 is given below.

Assets: The total assets of the firm amount to Rs. 10,00,000. This includes fixed assets worth Rs. 6,50,000 and current assets worth Rs. 3,50,000. Fixed assets include land, building, plant and machinery, while current assets include cash, debtors, and stock.

Liabilities: The total liabilities of the firm amount to Rs. 8,00,000. This includes long-term liabilities worth Rs. 4,00,000 and current liabilities worth Rs. 4,00,000. Long-term liabilities include loans and mortgages, while current liabilities include creditors and bills payable.

Capital: The capital of Mr X and Y amounts to Rs. 2,00,000. This is the excess of assets over liabilities, and represents the amount invested by the partners in the firm. The capital is shared in the ratio of 4:1 between Mr X and Y, i.e., Mr X's capital is Rs. 1,60,000 and Y's capital is Rs. 40,000.

Profit and Loss: The profit and loss account shows a net profit of Rs. 1,20,000 for the year ended 31 March 2015. This is the excess of the revenue earned over the expenses incurred during the year. The profit is shared between the partners in the ratio of 4:1, i.e., Mr X's share of profit is Rs. 96,000 and Y's share of profit is Rs. 24,000.

Conclusion: The balance sheet of Mr X and Y shows the financial position of the firm as on 31 March 2015. It indicates the sources of funds (capital and liabilities) and the uses of funds (assets) of the firm. The balance sheet also shows the profitability of the firm, which is reflected in the profit and loss account. The balance sheet is a useful tool for evaluating the financial health of a firm and for making decisions regarding investments and financing.