Choosing a Format for a Balance Sheet

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  
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