Similar to the accounting equation, assets are always listed first. Let’s look at each of the balance sheet accounts and how they are reported. Liabilities are also separated into current and long-term categories. Current assets consist of resources that will be used in the current year, while long-term assets are resources lasting longer than one year. In both formats, assets are categorized into current and long-term assets. Assets are always present first followed by liabilities and equity. This form is more of a traditional report that is issued by companies. The report form, on the other hand, only has one column. The debit accounts are displayed on the left and credit accounts are on the right. You can think of this like debits and credits. The account form consists of two columns displaying assets on the left column of the report and liabilities and equity on the right column. This statement can be reported in two different formats: account form and report form. Investors and creditors generally look at the statement of financial position for insight as to how efficiently a company can use its resources and how effectively it can finance them. In this way, the balance sheet shows how the resources controlled by the business (assets) are financed by debt (liabilities) or shareholder investments (equity). The balance sheet is basically a report version of the accounting equation also called the balance sheet equation where assets always equation liabilities plus shareholder’s equity. Annual income statements look at performance over the course of 12 months, where as, the statement of financial position only focuses on the financial position of one day. ![]() This is why the balance sheet is sometimes considered less reliable or less telling of a company’s current financial performance than a profit and loss statement. ![]() ![]() The balance sheet is essentially a picture a company’s recourses, debts, and ownership on a given day. Unlike the income statement, the balance sheet does not report activities over a period of time. You can think of it like a snapshot of what the business looked like on that day in time. It reports a company’s assets, liabilities, and equity at a single moment in time. The balance sheet, also called the statement of financial position, is the third general purpose financial statement prepared during the accounting cycle.
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