Vertical Balance Sheet
What is a Vertical Balance Sheet?
A vertical balance sheet is a presentation structure with a single column of figures, starting with asset line items and ending with shareholders’ equity line items.
In a vertical balance sheet, you must provide the line items in decreasing order of liquidity within each of these categories. As a result, the presentation inside the topmost block of line items (for assets) frequently starts with cash. It finishes with fixed assets (far less liquid than cash) or goodwill. For the same reason, the liabilities section typically begins with accounts payable and ends with long-term debt.
Why is a Vertical Balance Sheet Crucial?
A vertical balance sheet allows the reader to compare the statistics on the balance sheet for a single time. For example, you can compare your current assets and current liabilities total to evaluate a company’s liquidity as of the balance sheet date.
Vertical Balance Sheet Format
|Particulars||Note No.||Figures as of the end of the current reporting period||Figures as of the end of the previous reporting period|
|I. EQUITY AND LIABILITIES|
|1. Shareholders’ Funds|
|b.Reserves and Surplus||XXXX||XXXX|
|c.* Money Received Against Share Warrants||XXXX||XXXX|
|2. * Share Application Money Pending Allotment|
|3. Non-current Liabilities|
|b.* Deferred Tax Liabilities (Net)||XXXX||XXXX|
|c.* Other Long-term Liabilities||XXXX||XXXX|
|4. Current Liabilities|
|c.Other Current Liabilities||XXXX||XXXX|
|1. Non-current Assets|
|a. Fixed Assets|
|1. Tangible Assets||XXXX||XXXX|
|2. Intangible Assets||XXXX||XXXX|
|3.* Capital Work-in-progress||XXXX||XXXX|
|4. Intangible Assets under Development||XXXX||XXXX|
|b. Non-current Investments||XXXX||XXXX|
|c.* Deferred Tax Assets (Net)||XXXX||XXXX|
|d. Long-term Loans and Advances||XXXX||XXXX|
|e.* Other Non-current Assets||XXXX||XXXX|
|2. Current Assets|
|c. Trade Receivables||XXXX||XXXX|
|d. Cash and Cash Equivalents||XXXX||XXXX|
|e. Short-term Loans and Advances||XXXX||XXXX|
|f. Other Current Assets||XXXX||XXXX|
Vertical Vs Horizontal Balance Sheet
The horizontal balance sheet format is an alternative to the vertical balance sheet format, in which assets appear in column one and liabilities and shareholders’ equity appear in column two. Therefore, the totals in each column should always be the same in this format.
The popularity of vertical balance sheets is more as it allows you to add balance sheets for numerous periods on a single page. The incorporation is by utilising a side-by-side presentation arrangement covering many reporting periods.
How to Prepare a Vertical Balance Sheet
You must already be familiar with balance sheet generation. Now to dive deeper into vertical balance sheet making, keep note of the steps below:
Any change in treatment or disclosure required by the Act, consisting of any addition, alteration, substitute, or deletion to the headings or subheadings of the financial statements or statements forming part of them, can be made. The provisions of this Schedule will be changed accordingly.
The disclosure obligations indicated in a vertical balance sheet are in addition to, not in place of, the disclosure standards outlined in the Accounting Standards imposed by the Companies Act of 2013. You can make additional disclosures specified per accounting standards in the notes to accounts. These disclosures, however, are not required to be included on the face of the Financial Statements.
Notes to Accounts Data
Apart from the data shown in the Financial Statements, Notes to Accounts must consist of information such as narrative explanations. Or else, the notes should contain disaggregation of items recognised in those statements and information concerning items that do not qualify for recognition.
Financial Statement Inclusions
Each item on a vertical balance sheet and Profit and Loss Statement must cross-reference any pertinent information in the notes to accounts.
When you create Financial Statements, include the notes to accounts. However, do not offer excessive detail that may not benefit financial statement consumers and fail to give vital information owing to excessive aggregation.
Financial Statement Figures
Depending on the company’s turnover, you can round off the figures in the Financial Statements. For example, if the total revenue is almost 100 crore rupees, round it to the next hundreds, thousands, lakhs, millions, or decimals. If the turnover exceeds 100 crore rupees, rounding to the nearest lakhs, millions, crores, or decimals is permitted.
First Financial Statements
Following incorporation, the first financial statements presented to the company must include corresponding amounts (comparatives) for all the items shown in the financial statements, including notes, for the immediately preceding reporting period.
Rather than struggling to make a vertical balance sheet, you can opt for GST billing and accounting software like myBillBook to meet your vertical balance sheet requirements. It offers a balance sheet report in which you can enter assets and liabilities and finally download the report.
FAQs about vertical balance sheet
What is a vertical balance sheet?
A vertical balance sheet is one with a column of statistics beginning with asset line items and ending with shareholders' equity line items.
Why do you need a vertical balance sheet?
You will need a vertical balance sheet to allow the reader to compare the statistics on the balance sheet for a single time.
Does a vertical balance sheet serve the same purpose as a horizontal balance sheet?
Yes, but the formats are different. The horizontal balance sheet format has assets shown in column one, and liabilities and shareholders' equity appears in column two. The totals in each column should always be the same in this format.
What do notes to accounts in a balance sheet contain?
Notes to accounts must include information, like narrative descriptions of items recognised in those statements and information about items not qualified for recognition in those statements.
What Do You Mean by a Balance Sheet?
The balance sheet displays a company's total assets and how the company finances the assets through debt or equity. In addition, it denotes the net worth statement or a statement of financial condition.