Balance sheet: Difference between revisions
imported>Doug Williamson (Update as Statement of financial position overtakes Balance sheet as the most usual name.) |
imported>Doug Williamson (Add link.) |
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''Financial reporting - primary statements.'' | |||
(BS). | (BS). | ||
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The balance sheet is one of the primary statements in financial reporting. | |||
Also known as the ''Statement of financial position''. | |||
The balance sheet summarises the assets, liabilities and shareholders’ funds at the balance sheet date. | |||
Shareholders' funds are also known as 'equity'. | |||
Equity includes original share capital invested, as well as cumulative retained profits to date. | |||
Under the 'double entry' accounting convention, assets are Debits (DR) and liabilities and shareholders' funds are Credits (CR). | Under the 'double entry' accounting convention, assets are Debits (DR) and liabilities and shareholders' funds are Credits (CR). | ||
The standard UK balance sheet presentation for external reporting is Net Assets = Shareholders' Funds. | The standard UK balance sheet presentation for external reporting is Net Assets = Shareholders' Funds. | ||
The Net assets part of the balance sheet is sometimes called the 'top half'. | The Net assets part of the balance sheet is sometimes called the 'top half'. | ||
The Shareholders' funds part being the 'bottom half'. | The Shareholders' funds part being the 'bottom half'. | ||
TOP HALF: | :<span style="color:#4B0082">'''''Example summary balance sheet'''''</span> | ||
Assets 100 DR | |||
- Liabilities (20) CR | :TOP HALF: | ||
= Net assets 80 DR | |||
:Assets 100 DR | |||
:- Liabilities (20) CR | |||
:= Net assets 80 DR | |||
:BOTTOM HALF: | |||
:Shareholders’ funds 80 CR | |||
''(Total shareholders' funds being detailed in turn into share capital and reserves. Assets and liabilities also being appropriately listed in fuller detail.)'' | |||
The balance sheet equation in summary using the convention above is 80 = 80. | The balance sheet equation in summary, using the convention above, is 80 = 80. | ||
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There are many other ways to present this information in other balance sheet formats. | There are many other ways to present this information in other balance sheet formats. | ||
Alternative balance sheet conventions maintain the balanced/double-entry principle, but may show for example: | Alternative balance sheet conventions maintain the balanced/double-entry principle, but may show for example: | ||
Total Assets = Total Liabilities + Shareholders' Funds | Total Assets = Total Liabilities + Shareholders' Funds; OR | ||
Total Assets = Total Liabilities + Equity | |||
Presented on this alternative basis (assets = liabilities) and using the same summary figures as before: | |||
TOP HALF: | TOP HALF: | ||
Total assets 100 DR | Total assets 100 DR | ||
BOTTOM HALF: | BOTTOM HALF: | ||
Total liabilities 20 CR | Total liabilities 20 CR | ||
+ | |||
= Total liabilities & | + Equity 80 CR | ||
= Total liabilities & equity 100 CR | |||
The same balance sheet information has now been presented as 100 = 100, using the alternative convention. | The same balance sheet information has now been presented as 100 = 100, using the alternative convention. | ||
The Total liabilities of 20 CR are now presented in the bottom half of the balance sheet (rather than in the top half as before). | The Total liabilities of 20 CR are now presented in the bottom half of the balance sheet (rather than in the top half as before). | ||
The choice of presentation will depend on the purposes for which the balance sheet information is required, together with any rules or conventions applying to the entity's external reporting. | |||
Total liabilities & equity of 100 CR means the same thing as Total liabilities & shareholders' funds of 100 CR. | |||
(Equity and Shareholders' funds being alternative names for the same item.) | |||
The choice of presentation and terminology will depend on the purposes for which the balance sheet information is required, together with any rules or conventions applying to the entity's external reporting. | |||
== See also == | == See also == | ||
* [[Accounting equation]] | |||
* [[Accruals]] | |||
* [[Assets]] | * [[Assets]] | ||
* [[Balance]] | |||
* [[Balance sheet date]] | |||
* [[Balance sheet exposure]] | * [[Balance sheet exposure]] | ||
* [[ | * [[Balance sheet insolvent]] | ||
* [[Balance sheet ratio]] | |||
* [[Balance sheet reduction policy]] | |||
* [[Book]] | |||
* [[Book value]] | |||
* [[Bookkeeping]] | |||
* [[Cash]] | |||
* [[Cash balance]] | |||
* [[Cash flow]] | |||
* [[Cash flow statement]] | |||
* [[Contingent assets]] | |||
* [[Contingent liabilities]] | |||
* [[Credit balance]] | * [[Credit balance]] | ||
* [[Current/non-current method]] | * [[Current/non-current method]] | ||
* [[Debit balance]] | * [[Debit balance]] | ||
* [[Double entry]] | * [[Double entry]] | ||
* [[Double entry bookkeeping]] | |||
* [[Equity]] | |||
* [[Event after the balance sheet date]] | * [[Event after the balance sheet date]] | ||
* [[Financial reporting]] | |||
* [[Financial statements]] | * [[Financial statements]] | ||
* [[Income statement]] | * [[Income statement]] | ||
* [[Liabilities]] | * [[Liabilities]] | ||
* [[Net assets]] | |||
* [[Off balance sheet]] | * [[Off balance sheet]] | ||
* [[Off | * [[Off balance sheet finance]] | ||
* [[Off balance sheet risk]] | |||
* [[Post balance sheet event]] | * [[Post balance sheet event]] | ||
* [[Primary statements]] | |||
* [[Profit and Loss account]] | * [[Profit and Loss account]] | ||
* [[Share capital]] | * [[Share capital]] | ||
* [[Shareholders’ funds]] | * [[Shareholders’ funds]] | ||
* [[Short term]] | * [[Short term]] | ||
* [[Statement of changes in equity]] | |||
* [[Statement of comprehensive income]] | |||
* [[Statement of financial position]] | * [[Statement of financial position]] | ||
* [[Trial balance]] | |||
* [[Window-dressing]] | |||
== | ==External link== | ||
[http://www.treasurers.org/node/5176 Is your balance sheet sound? The Treasurer, 2009] | [http://www.treasurers.org/node/5176 Is your balance sheet sound? The Treasurer, 2009] | ||
[[Category:Accounting,_tax_and_regulation]] | [[Category:Accounting,_tax_and_regulation]] | ||
Latest revision as of 05:23, 20 July 2022
Financial reporting - primary statements.
(BS).
What is a balance sheet?
The balance sheet is one of the primary statements in financial reporting.
Also known as the Statement of financial position.
The balance sheet summarises the assets, liabilities and shareholders’ funds at the balance sheet date.
Shareholders' funds are also known as 'equity'.
Equity includes original share capital invested, as well as cumulative retained profits to date.
Under the 'double entry' accounting convention, assets are Debits (DR) and liabilities and shareholders' funds are Credits (CR).
The standard UK balance sheet presentation for external reporting is Net Assets = Shareholders' Funds.
The Net assets part of the balance sheet is sometimes called the 'top half'.
The Shareholders' funds part being the 'bottom half'.
- Example summary balance sheet
- TOP HALF:
- Assets 100 DR
- - Liabilities (20) CR
- = Net assets 80 DR
- BOTTOM HALF:
- Shareholders’ funds 80 CR
(Total shareholders' funds being detailed in turn into share capital and reserves. Assets and liabilities also being appropriately listed in fuller detail.)
The balance sheet equation in summary, using the convention above, is 80 = 80.
Alternative presentations of balance sheets
There are many other ways to present this information in other balance sheet formats.
Alternative balance sheet conventions maintain the balanced/double-entry principle, but may show for example:
Total Assets = Total Liabilities + Shareholders' Funds; OR
Total Assets = Total Liabilities + Equity
Presented on this alternative basis (assets = liabilities) and using the same summary figures as before:
TOP HALF:
Total assets 100 DR
BOTTOM HALF:
Total liabilities 20 CR
+ Equity 80 CR
= Total liabilities & equity 100 CR
The same balance sheet information has now been presented as 100 = 100, using the alternative convention.
The Total liabilities of 20 CR are now presented in the bottom half of the balance sheet (rather than in the top half as before).
Total liabilities & equity of 100 CR means the same thing as Total liabilities & shareholders' funds of 100 CR.
(Equity and Shareholders' funds being alternative names for the same item.)
The choice of presentation and terminology will depend on the purposes for which the balance sheet information is required, together with any rules or conventions applying to the entity's external reporting.
See also
- Accounting equation
- Accruals
- Assets
- Balance
- Balance sheet date
- Balance sheet exposure
- Balance sheet insolvent
- Balance sheet ratio
- Balance sheet reduction policy
- Book
- Book value
- Bookkeeping
- Cash
- Cash balance
- Cash flow
- Cash flow statement
- Contingent assets
- Contingent liabilities
- Credit balance
- Current/non-current method
- Debit balance
- Double entry
- Double entry bookkeeping
- Equity
- Event after the balance sheet date
- Financial reporting
- Financial statements
- Income statement
- Liabilities
- Net assets
- Off balance sheet
- Off balance sheet finance
- Off balance sheet risk
- Post balance sheet event
- Primary statements
- Profit and Loss account
- Share capital
- Shareholders’ funds
- Short term
- Statement of changes in equity
- Statement of comprehensive income
- Statement of financial position
- Trial balance
- Window-dressing
