The balance sheet can be presented in either account format or report format, with both being acceptable. The account format lists assets on the left and liabilities and equity on the right, while the report format lists assets first, followed by liabilities and equity. Other considerations include listing the month-ending date and including a running total. The balance sheet details a company’s net worth generated from business operations, with assets representing items owned, liabilities including money owed, and equity including investments.
An account format is a specific layout for a company’s balance sheet. The balance sheet is a financial statement that companies prepare at the end of the month to report assets, liabilities, and capital information for business operations. The account format lists assets on the left side of the balance sheet with liabilities and equity on the right. This is a classic representation of the balance sheet that many companies use to present accounting data. Other formats may exist, with another popular presentation method being the report format.
The report format used for the balance sheet lists the financial accounts in a different way. The assets are first near the top of the report. Below the assets are the liability accounts, followed by the equity accounts. This format essentially lists all the information from top to bottom. Assets will have a grand total after all accounts, equaling the grand total of the liabilities and equity sections on the balance sheet.
Both the account format and the report format are acceptable in terms of accounting principles. Companies can often choose which method they prefer to use when preparing financial statements. Publicly traded companies may use the reporting format when posting their balance sheets on websites. Financial services websites present information for a company’s stakeholders. The report format generally works better in the website format and creates a better presentation for this financial information.
Other considerations are also present in a balance sheet, regardless of whether a company uses the account format or the report format. First, a company must list the month-ending date under which the balance sheet falls. Second, the information on the financial statement must include a running total, with the account including information from the start of the business to the end of the current month. Third, a publicly traded company may need to issue an audited financial statement. Audited financial statements prove that a company’s financial statements comply with national accounting standards.
The balance sheet of account format details a company’s net worth generated from business operations. Assets represent items that a business owns and uses to generate profit, liabilities include any money owed to outside sources, and equity information includes owners’ and shareholders’ investments in the business. Net worth is the difference between the company’s assets and liabilities. A modification to this formula is to add retained earnings to this figure, which represents the net income that a company retains to grow business operations.
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