Balance sheet formats: Companies Act and FRS 102

UK company law gives two balance sheet formats. Format 1 is the familiar vertical layout that arrives at net assets and matches them with capital and reserves; Format 2 lists assets, then capital, reserves and liabilities, so the two sides total the same. FRS 102 allows companies to adapt either format to an IFRS style current and non current layout, and small companies can also abridge theirs with every member’s consent.

Where do the balance sheet formats come from?

Section 396(3) of the Companies Act 2006 requires Companies Act individual accounts to comply with regulations on the form and content of the balance sheet. For small companies the formats are in Part 1 of Schedule 1 to the Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 (SI 2008/409). Medium and large companies use Schedule 1 to the Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410), which has more sub headings. Paragraph 1(1) of each Schedule says every balance sheet must show the items in either of the two formats.

FRS 102 adopts these formats rather than inventing its own. Paragraph 4.2 points to the Schedules for entities applying the full standard, and paragraph 1A.12 does the same for small entities using Section 1A. Micro entities have shorter formats in Section C of the small companies Schedule, covered on the FRS 105 page. What the balance sheet represents is explained in financial statements explained.

How is Format 1 laid out?

Format 1 uses capital letters for main headings, roman numerals for sub headings and Arabic numbers for individual items. In the small company version the main headings run:

Letter	Heading
A	Called up share capital not paid
B	Fixed assets: I intangible, II tangible, III investments
C	Current assets: I stocks, II debtors, III investments, IV cash at bank and in hand
D	Prepayments and accrued income
E	Creditors: amounts falling due within one year
F	Net current assets (liabilities)
G	Total assets less current liabilities
H	Creditors: amounts falling due after more than one year
I	Provisions for liabilities
J	Accruals and deferred income
K	Capital and reserves: I share capital, II share premium, III revaluation reserve, IV other reserves, V profit and loss account

Its strength is that it shows working capital (item F) and the long term funding position (item G) as subtotals. The notes to the formats allow some items to move: called up share capital not paid can sit at A or within other debtors, prepayments can sit at D or within debtors, and accruals and deferred income can sit at J or within other creditors.

How does Format 2 differ?

Format 2 uses the same asset headings but presents them under ASSETS, followed by CAPITAL, RESERVES AND LIABILITIES with A capital and reserves, B provisions for liabilities, C creditors and D accruals and deferred income. There are no net current assets or total assets less current liabilities subtotals. Because creditors appear as one heading, note (10) to the formats requires amounts falling due within one year and after one year to be shown separately for each creditor item and in aggregate, and note (5) requires the aggregate of debtors due after more than one year. Format 2 is less common in UK private company accounts, but it suits readers used to a two sided presentation.

What flexibility do the statutory rules allow?

Section A of Schedule 1 sets general rules that apply to both formats:

• Consistency (paragraph 2): the same format must be used in later years unless the directors think there are special reasons for a change, which must be explained in a note.
• More detail (paragraph 3): any item can be shown in greater detail, and new items can be added, but preliminary expenses, share or debenture issue costs and research costs can never be shown as assets.
• Adapting and combining (paragraph 4): directors must adapt items given Arabic numbers where the special nature of the business requires it, and may combine them if the amounts are immaterial or combining helps the reader, disclosing the individual amounts in the latter case.
• Nil headings (paragraph 5): a heading with no amount in either year is left out.
• Comparatives, set off and substance (paragraphs 7 to 9): prior year figures are shown for every item, assets and liabilities cannot be set off against each other, and amounts are presented according to the substance of the transaction.

What is an adapted balance sheet?

Paragraph 1A(1) of Schedule 1 to SI 2008/410, and paragraph 1B(1) of the small companies Schedule, let directors adapt one of the formats to distinguish between current and non current items in a different way. Two conditions apply: the information must be at least equivalent to that in the unadapted format, and the presentation must follow generally accepted accounting practice.

FRS 102 sets the minimum content. Paragraph 4.2A, and paragraph 1AA.3 for small entities, list line items that must appear, split between current and non current, including property, plant and equipment, intangible assets, financial assets, inventories, trade and other receivables, cash and cash equivalents, trade and other payables, provisions, financial liabilities, current and deferred tax, and equity. Paragraph 4.2B requires sub classifications in the balance sheet or notes, such as amounts due from related parties and prepayments within receivables, and paragraph 4.2D requires current and non current assets and liabilities to be shown as separate classifications.

What changes for adapted formats from 1 January 2027?

In February 2026 the FRC amended FRS 102 to reflect IFRS 18, which replaced IAS 1. The changes affect only entities that adapt a format. From accounting periods beginning on or after 1 January 2027, with early application permitted, goodwill becomes a separate line item from other intangible assets, and new paragraphs 4A.8 to 4A.19 set out how to classify liabilities as current or non current. Under paragraph 4A.13, a loan covenant that must be met on or before the reporting date affects whether the right to defer settlement exists at that date, even if compliance is tested afterwards. Paragraph 4A.15 says a covenant breach that makes a loan repayable on demand makes it current, even if the lender waives the breach after the year end. Small entities adapting a format apply the same classification rules through new paragraph 1AA.3A.

What is an abridged balance sheet?

Only small companies can abridge. Paragraph 1A(1) of the small companies Schedule allows an abridged balance sheet showing only the items preceded by letters and roman numerals, provided the debtors note (and for Format 2 the creditors note) is complied with and all members have consented. Consent can only be given for the accounts of the preceding financial year, so it is needed each year, and abridgement is not available to a company that was a charity at any time in the year. Section 444(2A) requires a statement that all members consented to be delivered with the filed accounts. Paragraph 1AA.2 of FRS 102 reminds directors that abridged accounts must still give a true and fair view, which may require more detail in the notes. The filing options are set out in small company accounts filing options.

How do the same figures look in each format?

Illustration only. A company has fixed assets of £300,000, current assets of £200,000, creditors due within one year of £120,000, a bank loan due after more than one year of £100,000 and capital and reserves of £280,000.

Format 1	£	Format 2	£
Fixed assets	300,000	Fixed assets	300,000
Current assets	200,000	Current assets	200,000
Creditors due within one year	(120,000)	Total assets	500,000
Net current assets	80,000	Capital and reserves	280,000
Total assets less current liabilities	380,000	Creditors (120,000 within, 100,000 after one year)	220,000
Creditors due after one year	(100,000)	Total capital, reserves and liabilities	500,000
Net assets equal capital and reserves	280,000

What mistakes come up?

• Classifying a loan as due after one year when the company lacks an unconditional right to defer settlement for 12 months, which paragraph 4.7 requires for statutory formats.
• Not showing debtors due after more than one year where material; paragraph 4.4A says this belongs on the face of the balance sheet when readers might otherwise misread net current assets.
• Switching formats without the paragraph 2 note.
• Abridging without fresh member consent, or forgetting the section 444(2A) statement.
• Adapting a format but dropping information the statutory format would have shown.

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Related Accountapedia entries

• Creditors due within and after one year
• Profit and loss account formats
• Net current liabilities: what it means
• Distribution costs vs administrative expenses
• Current ratio and quick ratio

Sources

• legislation.gov.uk: Act 2006 c. 46, section 396
• legislation.gov.uk: SI 2008/409, schedule 1
• legislation.gov.uk: SI 2008/410, schedule 1
• Financial Reporting Council: FRS 102 September 2024 tmKYWO6
• Financial Reporting Council: Amendments to FRS 102 The Financial Reporting Standard applicable in t
• legislation.gov.uk: Act 2006 c. 46, section 444

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.