To get to know the balance sheet format I strongly feel that you should know about balance sheet to the fullest. So, we will proceed step by step.
The list of all the assets and liabilities of an entity for a given point of time is called balance sheet. The most unique feature of balance sheet is that it will always balance.
Things to notice here:
Now, the feature may look very much unique to a new comer in this field, but, some older learners of accounting would be very much accustomed to this feature.
Whatever there is, balance sheet is based on a principle and the principle is named as accounting equation. For, the purpose of this article I will provide the explanation and breakdown of the equation, but, if you would like to know more about accounting equation read the relevant article.
The accounting equation looks like:
A = L + OE
A = Asset
L = Liability
OE = Owner’s equity (Capital)
As this diagram shows us we can put the same thing in the equation and that looks like:
Now, from the equation it should clear to you what comes to the balance sheet and how it balances every single time (If you don’t believe then go ahead and try for yourself, you will notice accounting equation to match every time).
This is the general understanding you needed to get deep inside balance sheet format.
Putting the equation straight in the financial statements and just showing the final sums are not the focus. Remember the full disclosure principle and the completeness?
Any financial statement should be complete to the sense that it provides the complete and compact picture in one single place. That is where the balance sheet format comes into play. There are two widely followed balance sheet formats and either of them are capable of producing and providing the information to the users of that in the desired fashion.
There is an American format (The list format) and a British format (The two sided format).
There are different formats to present a balance sheet and they follow as below:
But, because of the limited time and scope of this article only the American and British formats are discussed and illustrated.
As on ………….., 2…….
As on ………….., 2…….