Explanation of the Balance Sheet

The given balance sheet provides information about the financial position of a company as on December 31, 1996 and December 31, 1997. It shows the company's assets, liabilities, and equity at the end of each year.

Liabilities

Liabilities are the company's debts or obligations that must be paid to creditors, suppliers, and other parties. The liabilities on the balance sheet for both years are as follows:

- Share capital: This is the amount of money raised by the company by issuing shares to investors. The company raised Rs. 3,00,000 in 1996 and Rs. 3,75,000 in 1997.
- Creditors: This represents the amount owed by the company to its suppliers and other creditors. The company owed Rs. 1,06,000 in 1996 and Rs. 70,000 in 1997.
- Profit and Loss: This represents the profits or losses made by the company during the year. The company had a profit of Rs. 14,000 in 1996 and Rs. 31,000 in 1997.

Assets

Assets are the resources owned by the company that have a measurable value. The assets on the balance sheet for both years are as follows:

- Machinery: This represents the value of the company's machinery. The machinery was valued at Rs. 70,000 in 1996 and Rs. 1,00,000 in 1997.
- Stock in trade: This represents the value of the company's inventory or stock of goods that have not been sold yet. The stock in trade was valued at Rs. 1,21,000 in 1996 and Rs. 1,36,000 in 1997.
- Debtors: This represents the amount owed to the company by its customers or clients. The company had debtors of Rs. 1,81,000 in 1996 and Rs. 1,70,000 in 1997.
- Cash: This represents the amount of cash or cash equivalents owned by the company. The company had cash of Rs. 48,000 in 1996 and Rs. 70,000 in 1997.

Conclusion

The balance sheet provides a snapshot of the company's financial position at the end of each year. It shows the company's assets, liabilities, and equity, and provides insight into its ability to meet its financial obligations. The increase in share capital, machinery, stock in trade, and debtors from 1996 to 1997 indicates that the company was growing and expanding its operations. The increase in cash and profits also indicates that the company was generating more revenue and had better financial performance in 1997 compared to 1996.