Presenting the Business Financial with Balance Sheet Format
By giving income and cash flow statement of a company, balance sheet might act as the indicator of company’s financial health. Creating balance sheet allows you to examine the efficiency of a company’s assets usage. In order to get all of the benefits, knowing balance sheet formats are highly recommended for everyone.
The Account Format
Like a T account, the balance sheet format here is divided into two sections (left and right). On the left side, you are demanded to list the assets of the company while the liabilities and equity on the right side. To make it correct and effective, the total amount of the left and right side must be equal.
The Report Format
In this balance sheet format, all of the components are positioned vertically in a single column where the assets are put on the top while the below section is filled with the company’s liabilities and followed by equity. Each of the categories is presented from the biggest to the lowest amount of liquidity.
The main intention of making balance sheet in this vertical format is to compare the numbers on the balance sheet in a single period. However this format is more popular than the horizontal one, since you can include multiple periods of balance sheets in a single page that allows a larger space for many reporting periods.
The Classified Format
In here, all of the components (assets, liability, and equity) are broken down in certain sub-categories to create more detailed, useful, and meaningful data that easily understandable. The sub-categories have no standard which means you can determine the classification types on your own. Commonly creditors and investors use this format to analyze their business financial.
This format presents the total assets, liability, and equity in numeric value and relative percentage for a quick analysis. Internal management of the company and external analysts like independent auditors use this format because of the format’s easy comparability.
The Comparative Format
For your information, the comparative balance sheet displays all of the balance sheet components as side-by-side information with an intention to give an overview of the company’s financial state over time to the readers. For example, comparative format presents the every year-end’s balance sheet for the past four years as a comparison.
Why should you know about the balance sheet format? Consider the following important things below to get the benefits of using them in your mind!
- Company stakeholders like investors, creditors, etc. use balance sheet as the tool to measure your company’s financial health.
- By identifying the comparison of balance sheet over time, your company’s growth can be identified.
- A balance sheet is a crucial document that is needed to get a bank loan.
- By analyzing the company’s balance sheet, you can identify the unexpected expenses and perform continuous projects.
- You can observe whether the company use selling profits or take debts to fund the operation expenses.
- Company stakeholders may evaluate the performance and liquidity of the business.