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Balance Sheet - Report Form:

Definition and Explanation:

Balance sheet shows the financial position or condition of an organization at a particular point in time. In fact, it is sometimes referred to as a position statement or statement of condition.

It shows the economic resources (properties, possessions) of an organization, referred to as assets, and the claims that creditors and owners have against the assets. Economic obligations of an organization (amount owed to creditors) are called liabilities, and owners, claims are referred to as owner's equity, or capital.

A common arrangement of the balance sheet is to list assets on the left side and liabilities and owner's equity on the right. This balance arrangement, with assets and equities (liabilities) side by side, is sometimes referred to as the account form of balance sheet, because it resembles the traditional T-form of an account.

An alternative arrangement, sometimes called the report form of balance sheet, centers the asset section under the heading, with the equity claims shown below the asset. The report form frequently fits on a standard sheet of paper better than the account form.

Assets are normally reported on balance sheet in the order of their relative nearness to cash. For example, the account receivable (sundry debtors) account usually follows the cash account because the accounts receivable are likely to turn into cash very soon. On the other hand, assets like land and buildings are normally listed towards the end, because they are expected to be around a long time. So, the balance sheet that divides its accounts into subgroups within the major sections of the statement is called a classified balance sheet. Generally assets are divided into two groups, current and non-current assets are cash and other assets that are relatively close to being cash. In practice, an asset is classified as current if it can meet any of the following conditions within the year:

  1. If it can reasonably be expected to turn into cash.

  2. If it can easily be converted to cash by the managers of the entity.

  3. If it can take the place of cash (as with prepaid expenses).

When assets are divided into current and non-current groups, It is common practice to classify liabilities in a similar way. Current liabilities are liabilities that cash reasonably be expected to be paid within one year. Naturally, the liabilities that are not expected to be paid within one year are transferred to as non-current liabilities:

Format/Example of Report Form Balance Sheet:

The format of a balance sheet in report form is given below:

Name of the Business
Balance Sheet
December 31, 2005


Current Assets:      
Cash     2320000
Marketable securities     820000
Accounts receivable (net)     2661000
Inventories (finished goods, work in process, materials)     3,23,1800
Prepaid insurance, taxes, and miscellaneous expenses     220000
Total current assets     9252800
Property, Plant, and Equipment:      
Land   289000  
Buildings 3406100    
Machinery and equipment 12529000    
Less accumulated depreciation 8118000 7817100  

Total property plant and equipment     8106100


Current liabilities:      
Accounts payable     990800
Accrued payroll, taxes, interest, etc.     1045000
Estimated income tax     190700
Due on long term debt     200000
Total current liabilities     2426500
Long term debt     2677500
Total liabilities     5104000
Stockholders' Equity      
Common stock   425800  
Retained earnings   7996900  
Total stockholders' equity     12254900
Total liabilities and stock holders equity     17358900

Relevant Articles:

Income statement
Cost of Goods Sold Statement
Cost of Goods Manufactured Statement
Balance Sheet - Report Form
Difference between Income Statement and Trading and Profit and Loss Account
Adjustments and their Effect on Financial Statements
Evaluation of Financial Statements





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