The Importance of the Balance Sheet Heading

(first component of the Balance Sheet)

The first component of the balance sheet is the heading. The Heading is extremely important since it tells the readers of the balance sheet three important pieces of information:

1.   the name of the company;
2.   the type of statement to follow (in this case the Balance sheet);
3.   the date at which each account value applies.

Below is the heading for our balance sheet example:

Balance Sheet
As of December 31, 200X


As you can see the company is called THE TOY COMPANY, the statement is the Balance Sheet and the date is "As of December 31, 200X". The date is the most important section of the Heading. As mentioned earlier, the date indicates the "time" at which the account values apply. If the date was AS OF DECEMBER 10 - 200X, the account balances (values) would be different. For example, the amount of cash the Toy Company had on December 10 would be different than the amount of cash it had on December 31. You will begin to understand the importance of dates as you become more familiar and more comfortable with financial statements.

Categories: Financial