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: