Final answer:
The presentation of stockholder's equity and liabilities on a balance sheet can vary between US GAAP and IFRS, with GAAP often listing liabilities before equity, and IFRS providing more flexibility.
A bank's balance sheet consists of assets, liabilities, and bank capital, reflecting the bank's financial position at a given time. T-accounts, a two-column balance sheet format, serve as an internal accounting tool.
Step-by-step explanation:
The student’s question concerns the presentation order of stockholder’s equity and liability on a balance sheet under US GAAP compared to IFRS. Under US GAAP, the balance sheet follows a specific order where liabilities are typically presented before equity.
Conversely, IFRS does not prescribe a specific order, allowing for a reverse order with equity listed before liabilities or any other method that provides the most relevant information. The main focus is on the usefulness of the information to the users of the financial statements.
A bank's balance sheet is a financial statement that reflects the bank's financial position by listing its assets, liabilities, and bank capital at a specific point in time.
Assets might include cash in vaults, reserves held at the Federal Reserve, and loans made to customers, whereas liabilities would include deposits and borrowings.
The difference between these assets and liabilities is known as the bank’s net worth or bank capital, similar to shareholders' equity for corporations. Shareholders in a corporation have their liability limited to the amount they’ve invested in the company.
When entities prepare their financial statements, they may use T-accounts — a two-column balance sheet format that lists assets on one side and liabilities and equity on the other, resembling the shape of the letter T. This tool is used for internal accounting and is not typically presented in official financial statements.