Excerpt from The Journal of Accountancy, 1922, Vol. 34
This topic will receive further attention later in this article.
Form of Balance-sheet
Much has been written on the subject of a standard form of balance-sheet, but a casual reference to a few forms prepared by banks and bankers, which have been selected at random, discloses a striking lack of uniformity among those commonly used.
I should like to put the following question: In submitting a certified balance-sheet should the accountant follow the form prescribed by the client's bank or by the broker who handles his paper, or should he adopt a form of his own, which in his judgment, owing to the peculiar circumstances of the case, sets forth clearly the client's financial condition, with particular emphasis upon certain outstanding features disclosed by the audit?
I do not propose to answer that question, but for the purpose of laying the foundation for discussion, which I hope will follow, I shall mention some of the significant variations in three selected balance-sheet forms, designated for convenience as "A", "B" and "C".
Current Assets:
Balance-sheet "A" classifies as current assets, cash, notes and accounts receivable, inventories, quickly marketable securities and notes and accounts due from officers, stockholders and employees. Balance-sheets "B" and "C" include as current all of the foregoing assets except notes and accounts receivable from officers, stockholders and employees. Such items in many instances may be slow in realization, but in the other cases they may be quick assets and, for the purpose of setting forth the assets available for meeting current liabilities, they should be included under those conditions as current assets.
Balance-sheets "A" and "B" make no provision for subdividing the asset items for notes, accounts receivable, merchandise or securities, so as to show what has been pledged as security for loans, while balance-sheet "C" assembles in a separate group all pledged current assets (notes and accounts receivable, acceptances, merchandise and securities).
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