Choosing a Format for a Balance Sheet

By Lita Epstein from Bookkeeping For Dummies

Companies in the United States usually choose between two common formats for their balance sheets: the Account format or the Report format. The actual line items appearing in both formats are the same; the only difference is the way in which you lay out the information on the page. A third option, the Financial Position format, is more commonly used in Europe.

Account format

The Account format is a two-column layout with Assets on one side and Liabilities and Equity on the other side. Using the Account format, here’s a sample balance sheet.

Company X Balance Sheet As of May 31, 2011
Current Assets:		Current Liabilities:
Cash	$3,000	Accounts Payable	$2,200
Accounts Receivable	$1,000	Total Current Liabilities	$2,200
Inventory	$1,200	Long-Term Liabilities:
Total Current Assets	$5,200	Loans Payable	$29,150
Long-Term Assets:		Total Long-Term Liabilities	$29,150
Equipment	$5,050	Equity:
Furniture	$5,600	Capital	$5,000
Vehicles	$25,000	Retained Earnings	$4,500
Total Long-Term Assets	$35,650	Total Equity	$9,500
Total Assets	$40,850	Total Liabilities & Equity	$40,850

Report format

The Report format is a one-column layout showing assets first, then liabilities, and then equity. Using the Report Format, here’s the balance sheet for Company X:

Company X Balance Sheet As of May 31, 2011
Current Assets:
Cash	$3,000
Accounts Receivable	$1,000
Inventory	$1,200
Total Current Assets		$5,200
Long-Term Assets:
Equipment	$5,050
Furniture	$5,600
Vehicles	$25,000
Total Long-Term Assets		$35,650
Total Assets		$40,850
Current Liabilities:
Accounts Payable	$2,200
Total Current Liabilities		$2,200
Long-Term Liabilities:
Loans Payable	$29,150
Total Long-Term Liabilities		$29,150
Equity:
Capital	$5,000
Retained Earnings	$4,500
Total Equity		$9,500
Total Liabilities and Equity		$40,850

Financial Position format

The third type of balance sheet format, the Financial Position format, is rarely seen in the U.S., but is used commonly in the international markets, especially in Europe. This format doesn’t have an Equity section but includes two line items that don’t appear on the Account or Report formats:

Working Capital: Calculated by subtracting current assets from current liabilities. It’s a quick test to see whether or not a company has the money on hand to pay bills.
Net Assets: What’s left over for a company’s owners after all liabilities have been subtracted from total assets. (Note that Net Assets is the same number as Total Equity in the other two formats.)

Using the Financial Position format, here’s the balance sheet for Company X:

Company X Balance Sheet As of May 31, 2011
Current Assets:
Cash	$3,000
Accounts Receivable	$1,000
Inventory	$1,200
Total Current Assets		$5,200
Current Liabilities:
Accounts Payable	$2,200
Total Current Liabilities		$2,200
Working Capital		$3,000
Noncurrent Assets:
Equipment	$5,050
Furniture	$5,600
Vehicles	$25,000
Plus Noncurrent Assets:		$35,650
Total Assets less Current Liabilities	$38,650
Long-Term Liabilities:
Loans Payable	$29,150
Less Long-Term Liabilities		$29,150
Net Assets		$9,500