>> December 22, 2010
Vertical form of balance sheet does not demonstrate just financial position but it also shows the flow of fund in one year. We can create our balance sheet in such shape for knowing the exact position of our funds. If we include the previous figures of liabilities and assets, then we need not to make fund flow statement because to show the comparison of two period vertical balance sheets is just like fund flow statement. In short cut, it fulfills the requirement of fund flow analysis. One more mystery can be analyzed with this form of balance sheet. We can evaluate changes in working capital by comparing two vertical balance sheets.
Morover, most of the companies today use the vertical form for reporting because with this balance sheet looks without any clutter.
Now, we tell you the structure of vertical balance sheet. Basic formula is of accounting equation.
Capital + Liabilities = Assets
Shareholder’s fund + long term liabilities + short term liabilities = Fixed assets + current assets
Shareholder’s fund + Long term liabilities = Final Assets + Current Assets – Current Liabilities
Source of Fund = Application of Fund
Related : How to Prepare the Balance Sheet of Company
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