A classified balance sheet is an example of a balanced sheet.
A classified balance sheet is a financial statement that reports asset, liability, and equity accounts in meaningful subcategories for readers' ease of use.It breaks down the balance sheet accounts into smaller categories to create a more useful and meaningful report.
There isn't a set of subcategories or required amount that must be used.Current and long-term are the most common classifications used by management.
The format gives end users more information about the company.The categories can be used in the financial analysis of the business.The current ratio can be used to assess the company's leverage and solvency.This type of analysis would not be possible with a traditional balance sheet.
The main accounting equation accounts are divided into useful categories.A report that simply lists the assets, liabilities, and equity in total is much harder to read and understand.This example can be used as a template.
There are no set requirements for industries.A manufacturer might list different categories than a retailer.You can do the same thing.
In order to answer the question what is a classified balance sheet, we have to walk through each section.
Current, fixed assets, and other are the main subcategories of the assets section.
Resources used in the current period are included in current assets.Current assets include cash and accounts receivable.The balance sheet shows merchandise inventory as a current asset.
Property, plant, and equipment that are long-term in nature are used to produce goods or services for the company.These long-term assets are typically depreciated over time and reported at their historical cost along with the associated accumulated depreciation.
There are resources that don't fit into the other two categories.Here is a list of the most common assets.
Current, long-term, and owner/ officer debt are the main subcategories of the liabilities section.
Current liabilities include debts that are due in the current period.This is the amount of principle that needs to be repaid in the next year.Accounts payable and accrued expenses are the most common current liabilities.
There are obligations that are not due in the next year.The obligations could be 5, 10, or 30-year notes.Some of the long-term notes will be due in the next year.This portion is always reported in the current section.
The loans from the shareholders, partners, or officers of the company are included in the owner/officer debt section.Information about the source of debt and the financing of the company can be found in this section.If there is a large shareholder loan on the books, it could mean that the company can not fund its operations with profits and can't qualify for a commercial loan.Any potential investor or creditor should be aware of this information.