Being non-technical, it is perhaps more favored by executives not versed in technical account-keeping.
The second form ([illustrated on page 233]) follows the proprietorship equation when written
Assets = Liabilities + Proprietorship
This form shows financial condition by means of the account form, the subtraction of the liabilities from the assets being indicated by their respective debit and credit positions in the account. It will be noticed, however, that this method of showing the subtractions is not strictly adhered to, some deductions being actually performed, as for instance in the case of the valuation reserves which are subtracted from the respective assets to which they apply. This is done in order to render the statement more intelligible. The same principles govern the arrangement of the items and groups of items as in the first form, viz., degree of liquidity for the assets and a similar arrangement for the liabilities. The account form is used almost always when the statement is submitted for publication.
Two Forms for the Profit and Loss Statement.—The statement of profit and loss is also made up in either of two forms, called the report form and the account form, based on the same principles as the two forms of balance sheet just discussed. Explanation of the report form has already been given in Chapters [V] and [VI]. The account form ([illustrated on page 235]) is very nearly a transcript of the ledger Profit and Loss account. It differs chiefly in that the information concerning “sales” which is summarized in the Sales account on the ledger is here set up in an inner column and shown summarized on the face of the statement. The information as to cost of goods sold is similarly summarized.
Form 24. Balance Sheet—Report Form
Form 25. Balance Sheet—Account Form