The real and personal accounts in the balance sheet should be arranged in such a way that anyone reading them – of course with some understanding of accounting – can immediately get a true and fair view of the firm’s financial position. This is intended to be achieved by Grouping and Marshalling of various items in the balance sheet. The terms ‘grouping’ means putting together under the common heading the items of the same nature. The term ‘marshalling’ denotes the order of classes in which the assets and liabilities are stated in the balance sheet. The items in the balance sheet are generally marshaled in the following two ways:

the assets being stated in the order in which they can be converted into cash and the liabilities in the order in which they have to be paid off – current or long term according to whether they will be used or disposed off within one year or more than one year, or

It is generally found that a business firm has a main purpose such as producing goods or services or sale. Most of the assets are held acquired for a subsidiary purpose as well. In this case, a separate sub-classification may be used for land held for investments form the fixed assets held for use in business activities. Although this criterion will most often affect the assets but purpose can affect the classification of liabilities too. The typical example is loan from a bank. Banks normally provide funds for short-term and therefore bank loan is a short-term liability. However, banks may grant loans to purchase property or to expand business. In such a case the bank loan would be classified as a long-term liability.



The list is not exhaustive.
The same order of listing should be adopted in the case of both assets and liabilities, that is, if assets side begins with the most fixed or long-term asset, the liabilities side should also begin with the most fixed or long-term liability. Cash includes cash in hand, cash at bank and petty cash balance. Limited Liability Companies, Banking Companies, Insurance Companies etc., prepare their Balance Sheets in the prescribed forms under the relevant Acts.
Sundry Creditors mean Creditors for goods.
Loan on Mortgages mean loans for longer period secured on the mortgage of fixed assets.

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