"There is a difference in the composition of assets of manufacturing and service companies"- Discuss the

reasons”

Similarities of both sectors balance sheet

As per accounting equation Assets = Liabilities + Owner’s Equity

In any company balance sheet we will see these things that are common.

1. Both have current assets and long term assets.

2. Both have current liabilities and long term liabilities.
3. Both have shareholders that buy the shares of the company.
 Manufacturing Company
This balance sheet is different from bank balance sheet on few things. They have assets that are not
in bank balance sheet. (Inventory, Accounts Receivables, Accounts Payables.). We see that in bank
balance sheet there is no term like this because they do business of finance that is a paper and
manufacturing companies do business of real goods are consumed by consumer.
 Banking
Banking sector has four main categories of assets:
1. Physical Assets-Includes buildings, land, furniture and equipment owned by a bank.
2. Loans-Loans are primary source of interest revenue. While a loan is a liability for the
borrower, it is an asset for the bank, for the lender.
3. Reserves-This is small in amount, but extremely important. Reserves are what the
bank use for daily transactions, such as processing checks or satisfying cash
withdrawals. Bank use reserves as security for deposit.
4. Investment Securities-They pay more interest than reserves, but not as much as
loans. If a bank has a few extra reserves, but is not ready to lock in loans for the long
terms.