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An account format is a specific layout for a company’s balance sheet. The balance sheet is a financial statement companies prepare at month end to report the assets, liabilities, and equity information for business operations. The account format lists assets on the left side of the balance sheet with liabilities and equity on the right. This is a classic representation of the balance sheet many companies use to present accounting data. Other formats may exist, with another popular presentation method being the report format.
The report format used for the balance sheet lists financial accounts in a different manner. Assets come first near the top of the report. Below assets come liability accounts, followed by equity accounts. This format essentially lists all information from top to bottom. Assets will have a grand total after all accounts, equaling the grand total of the liabilities and equity sections on the balance sheet.
Both the account format and report format are acceptable in terms of accounting principles. Companies can often choose which method they prefer to use when preparing financial statements. Publicly held companies may use the report format when they list their balance sheets on websites. Financial service websites present information for a company’s stakeholders. The report format typically works better in the website format and creates a better presentation for this financial information.
Other considerations are also present in a balance sheet, regardless of a company using the account format or report format. First, a company must list the month end date under which the balance sheet falls. Second, information on the financial statement should include an ongoing total, with the account including information form the start of the business to the current month end. Third, a publicly held company may need to release an audited financial statement. Audited financial statements prove a company’s financial statements meet national accounting standards.
The account format balance sheet details a company’s net wealth generated from business operations. Assets represent items a company owns and uses to generate profits, liabilities include any monies owed to outside sources, and equity information includes owner and shareholder investments in the business. Net wealth is the difference between the company’s assets and liabilities. An alteration to this formula is to add retained earnings to this figure, which represents the net income a company retains to grow business operations.