Balance Sheet

Abstract

The paper attempts to study the balance sheet in a holistic context. It attempts to elaborate the various account heads of a balance sheet and explain the significance and usability of different accounts that are posted into the balance sheet. The paper starts with a brief description of the concept of balance sheet and its use for an organization. It then describes the difference in approach to valuation between US GAAP and IFRS. It also distinguishes between an expense (expired cost) and an asset, current and long-term assets and current and long-term liabilities. The paper then reviews the Apple's balance sheet and provides two examples of each of the categories discussed earlier. Furthermore, the paper also discusses retained earnings and explains as to how income or loss and dividends affect this account. It then takes Apple as an example and reviews its retained earnings account explaining as to how it has changed between the two past years. The paper also comments on three differences between Apple's and Philips' balance sheets and highlights Apple or Philips under the debt and equity financing methods.

Balance Sheet

A balance sheet, also called statement of financial affairs, summarizes everything that the company has and can be considered as a simple and clear picture of the organization's standing. In preparing the balance sheet the employer obtains valuable information about the business, as the state of their debts, which must be recovered or the availability of money at the moment or in the near future (Adams, 2006). The balance sheet is a "snapshot" of the heritage of the company that allows a business valuation, and specifically to know as restated (e.g. an asset approach to that of option fair value for the adoption of international standards) and how it is if it is solvent (Fay, Rhoads & Rosenblatt, 1971). In short, balance sheet is an extremely useful presentation of financial information, which provides a quick and valuable understanding of the current financial position of an organization (Dopson & Hayes, 2008).

Difference in Approach of Valuation by US GAAP and IFRS

There are not many differences between the international financial reporting standards (IFRS) and generally accepted accounting principles in the United States of America (U.S. GAAP). Although the basic principles are similar, there may be differences in the application details that could have a significant impact on the budget (Cote, 1997). The major differences in this regard can be those of interest rates, tax rates (as per the country economy) and other minor areas. Although these minor areas do impact the overall balance sheet structure, the impact of applying GAAP and IFRS as an accounting standard can yield varying results (Dopson & Hayes, 2008). The differences in the two standards are basically of the implementation of the principles on the way the organizations will function or operate. The basic accounting principles are the same due to the fact that the accounting principles have been designed perfectly and with great concepts (Fay, Rhoads & Rosenblatt, 1971).

Difference between Expense (Expired Cost) and an ...