External and Internal Balance Sheet

A balance sheet is a financial statement of a business that can be use for internal and external purposes. The preparation of both internal and external balance sheets is for different uses and they are intended for completely different audiences.

For example internal balance sheet is prepared to report financial transactions within a business. With the help of internal balance sheet financial conditions are reported to the managers and high level management of the business. Internal balance sheet is a detailed financial statement that provides complete financial information over a period of time. It is much more elaborated as compared to the external balance sheet. With the help of the financial details provided in the internal balance sheet manager can have a clear picture of the financial condition of the business that helps in better control of the business resulting in better decision making.

An external balance sheet is a balance sheet that is published in external financial reports of a business. The external financial reports are presented to the lenders and investors. External balance sheets are also called as classified balance sheet as it classifies assets and liabilities. Classification of assets and liabilities mean that both of these accounts are classified into basic groups or categories. In this way the accounts of assets and liabilities are easy to report to the lenders and investors. With the help of external balance sheet it is easy for the external audiences to understand and compare current assets to current liabilities.

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