Understanding Balance Sheets and Their Formatting Differences

Sam Sutton
Nov 27, 2025
4 min read

A balance sheet is a fundamental financial statement that provides a snapshot of a company’s financial position at a specific point in time. It lists what a company owns (assets), what it owes (liabilities), and the owner’s equity. While the core purpose of a balance sheet remains consistent, the way it is formatted can vary significantly depending on the accounting standards, industry practices, and company preferences. Understanding these differences helps readers interpret financial data more accurately and make better decisions.

What Is a Balance Sheet?

A balance sheet shows the financial health of a business by detailing three main components:

Assets: Resources owned by the company, such as cash, inventory, property, and equipment.
Liabilities: Obligations the company must pay, including loans, accounts payable, and other debts.
Equity: The owner’s residual interest after liabilities are subtracted from assets. It includes retained earnings and contributed capital.

The balance sheet follows the fundamental equation:

Assets = Equity + Liabilities

This equation must always balance, which is why the statement is called a balance sheet.

Common Formats of Balance Sheets

Balance sheets can be presented in two primary formats: the account format and the report format. Each has its own layout and style.

Account Format

The account format displays assets on the left side and liabilities and equity on the right side, resembling a T-account. This format is less common in financial reporting but is useful for internal analysis and teaching purposes.

Left side: Lists assets in order of liquidity, starting with cash.
Right side: Lists liabilities first, followed by equity.

This side-by-side layout makes it easy to compare assets against liabilities and equity visually.

Report Format

The report format lists all items vertically in a single column. It starts with assets at the top, followed by liabilities, and ends with equity at the bottom. This format is the most widely used in financial statements and reports.

Assets are grouped and subtotaled.
Liabilities are grouped and subtotaled.
Equity is listed last, showing the residual interest.

This vertical layout is easier to read on paper and digital screens, especially for longer reports.

Differences in Formatting Based on Accounting Standards

Different accounting standards influence how balance sheets are formatted and presented. The two main standards are Generally Accepted Accounting Principles (GAAP) used in the United States and International Financial Reporting Standards (IFRS) used in many other countries.

GAAP Balance Sheets

GAAP requires companies to classify assets and liabilities as current or non-current.
Current assets and liabilities are those expected to be settled within one year.
Assets and liabilities are listed in order of liquidity.
Equity is presented after liabilities.
The report format is most common under GAAP.

IFRS Balance Sheets

IFRS also requires classification into current and non-current but allows more flexibility.
Some companies under IFRS may present assets and liabilities without strict current/non-current separation if it provides more relevant information.
IFRS encourages presentation that reflects the company’s financial position clearly.
The report format is standard, but account format is allowed.
Equity presentation may include more detailed components like reserves.

Industry-Specific Formatting Differences

Certain industries have unique balance sheet formats to reflect their business models and regulatory requirements.

Banking and Financial Institutions

Banks often present balance sheets with a focus on liquidity and capital adequacy.
Assets include loans and investments, often broken down by type and maturity.
Liabilities include deposits and borrowings.
Equity includes regulatory capital components.
The format may include additional disclosures related to risk.

Manufacturing Companies

Assets include raw materials, work-in-progress, and finished goods inventory.
Property, plant, and equipment are significant and detailed.
Liabilities include accounts payable and long-term debt.
Equity reflects retained earnings from operations.
The report format with detailed asset categories is common.

Nonprofit Organizations

Balance sheets are often called statements of financial position.
Assets and liabilities are classified as with donor restrictions or without donor restrictions.
Equity is replaced by net assets.
The format focuses on fund accounting and restrictions.

Practical Examples of Balance Sheet Formatting

To illustrate, consider two companies: a retail business in the U.S. following GAAP and a European tech firm following IFRS.

Retail Business (GAAP)

Assets listed as current assets first: cash, accounts receivable, inventory.
Non-current assets follow: property and equipment.
Liabilities split into current (accounts payable, short-term debt) and long-term debt.
Equity includes common stock and retained earnings.
Presented in report format with clear subtotals.

European Tech Firm (IFRS)

Assets may be presented without strict current/non-current split if it improves clarity.
Intangible assets like software development costs are highlighted.
Liabilities include deferred revenue, common in tech companies.
Equity includes share capital, reserves, and retained earnings.
Report format with detailed notes explaining classifications.

Why Formatting Differences Matter

Understanding how balance sheets are formatted helps users:

Compare companies: Knowing the format helps adjust for differences when comparing financial health.
Interpret data: Clear classification of assets and liabilities reveals liquidity and solvency.
Meet regulatory requirements: Companies must follow standards that affect how they report financials.
Make informed decisions: Investors, creditors, and managers rely on accurate balance sheet presentation.