The classified balance sheet can be a regular part of your employment if you are working in accounting and are liable for the balance sheet of your company. It is the type of balance sheet (BS) that is usually simple to read and extract information from those that are not aggregated in this manner.
Although it consumes time to organise your company’s balance sheet in this way, once done, it can save your essential effort and time. Therefore, this blog will let you know about the further details of a classified balance sheet.
What is a Classified Balance Sheet?
It is a financial statement classified into current assets, long-term investments, intangible assets, fixed assets, current liabilities, shareholder’s equity, long-term liabilities, etc. It can be easier to read and retrieve the required information by organising it into categories rather than listed in several line items.
Examples of Classifications for Balance Sheets
The following are the categories included in a balance sheet:
- Current assets
- Long-term investments
- Fixed assets (or property, plant, and equipment)
- Intangible assets
- Current liabilities
- Long-term liabilities
- Shareholders’ equity
- Other assets
Now, we will see the sub-caterioes of each category one by one.
It includes cash and also the assets that can be consumed in 1 year or converted into cash. The sub-categories included in current assets are as follows:
- Cash or assets equivalent of cash
- Prepaid investments
- Assets that are being held for sale
- Trade and other receivables
The sub-categories that fall under it are as follows:
- Funds redeemable for insurance policies
- For a plan expansion program, the amount of money that has been set aside
- Land purchased for speculation
- Investments in other companies
The following items are included in this category:
- Product equipment
- Computer software
- Accumulated depreciation
- Computer hardware
- Leasehold improvements
- Furniture and fixtures
The things that do not exist physically are intangible assets, like:
- Accumulated amortization
- Purchased patents
- CopyrightsRights under a franchise agreement
These are the company costs that will be paid entirely within one year (generally paid with utilising the company’s current assets). These liabilities may include the following:
- Liabilities held for sale
- Current tax liabilities
- Current portion of loans payable
- Trade and other payables
- Accrued expenses
- Other financial liabilities
These relate to any non-current obligation. Some may be partially classified as a current liability and partially as a long-term liability.
Any non-current obligation falls under these liabilities. Some can be classed as a current liability and some as a long-term liability.
- Bank loans
- Loans payable
- Deferred tax liabilities
- Mortgage notes
- Other non-current liabilities
The following is included in the equity section of a balance sheet.
- Capital stock
- Additional paid-in capital
- Retained earnings
How to Utilise Accounting Equation with Classified Balance Sheets
The accounting equation is a formula that is utilised in double-entry accounting, which represents the relation between your company’s assets, shareholder’s equity, and liabilities.
The sum of all the categories has to match the following accounting equation on your classified balance sheet.
Total assets = Shareholders’ equity + total liabilities
Both sides of this equation have to be equal. This is because you make purchases of either capital or debts.
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Quick Sum Up
We hope you have a better understanding of what a classified balance sheet is with the highlighted details. So, we would sum up the discussion by saying that this type of balance sheet makes the accounting process a lot easier and more manageable.
The process becomes less time-consuming and saves your energies to invest more efficiently to increase your business valuation. However, in order to enjoy these advantages, it is necessary to follow professional procedures and perform advanced accounting.
Disclaimer: This article intends to provide general information based on the classified balance sheet.