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Balance Sheet (Classified)

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Balance Sheet (Classified)

Meaning of Each Asset and Liability Classification Appearing on a Balance Sheet

Define each asset and liability classification appearing on a balance sheet

A classified balance sheet presents information about an entity’s assets, liabilities, and shareholders’ equity that is aggregated (or “classified”) into subcategories of accounts. It is extremely useful to use classifications, since information is then organized into a format that is more readable than a simple listing of all the accounts that comprise a balance sheet. When information is aggregated in this manner, a balance sheet user may find that useful information can be extracted more readily than would be the case if an overwhelming number of line items were presented.

The most common classifications used within a classified balance sheet are:

  • Current assets
  • Long-term investments
  • Fixed assets (or Property, Plant, and Equipment)
  • Intangible assets
  • Other assets
  • Current liabilities
  • Long-term liabilities
  • Shareholders’ equity

The sum of these classifications must match this formula:Total assets = Total liabilities + Shareholders’ Equity

The classifications used can be unique to certain specialized industries, and so will not necessarily match the classifications shown here. Whatever system of classification is used should be applied on a consistent basis, so that balance sheet information is comparable over multiple reporting periods.

Balance Sheet Items

Classify balance sheet items

There is no specific requirement for the classifications to be included in the balance sheet. The following items, at a minimum, are normally included in the balance sheet:

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Current Assets:

  • Cash and cash equivalents
  • Trade and other receivables
  • Prepaid expenses
  • Investments
  • Inventories
  • Assets held for sale

Long-Term Investments:

  • Investments in other companies

Fixed Assets:

  • Computer hardware
  • Computer software
  • Furniture and fixtures
  • Leasehold improvements
  • Office equipment
  • Production equipment
  • Accumulated depreciation

Intangible Assets:

  • Intangible assets
  • Accumulated amortization
  • Goodwill

Current Liabilities:

  • Trade and other payables
  • Accrued expenses
  • Current tax liabilities
  • Current portion of loans payable
  • Other financial liabilities
  • Liabilities held for sale

Long-Term Liabilities:

  • Loans payable
  • Deferred tax liabilities
  • Other non-current liabilities

Shareholders’ Equity:

  1. Capital stock
  2. Additional paid-in capital
  3. Retained earnings

Preparation of Classified Balance Sheet

Prepare a classified balance sheet

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Here is an example of a classified balance sheet, where the classifications are listed in bold in the first column:

Holystone Dental Corp. Statement of Financial Position

(000s)as of 12/31/x2as of 12/31/x1
ASSETS
Current assets
Cash and cash equivalents$270,000$215,000
Trade receivables147,000139,000
Inventories139,000128,000
Other current assets15,00027,000
Total current assets571,000509,000
Fixed assets
Furniture and fixtures551,000529,000
Leasehold improvements82,00082,000
Office equipment143,000143,000
Total non-current assets776,000754,000
Total assets$1,347,000$1,263,000
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables$217,000$198,000
Short-term borrowings133,000202,000
Current portion of long-term borrowings5,0005,000
Current tax payable26,00023,000
Accrued expenses9,00013,000
Total current liabilities390,000441,000
Long-term liabilities
Long-term debt85,00065,000
Deferred taxes19,00017,000
Total non-current liabilities104,00082,000
Total liabilities494,000523,000
Shareholders’ Equity
Capital$100,000$100,000
Additional paid-in capital15,00015,000
Retained earnings738,000625,000
Total equity853,000740,000
Total liabilities and equity$1,347,000$1,263,000

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