Classified Balance SheetDefined with Examples

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Written By:
Lisa Borga

Classified Balance Sheet Defined with Examples

A classified balance sheet reports an entity’s assets, liabilities, and equity into “classified” subcategories of accounts.

This creates a particularly useful report because the information is broken down into a format that is far easier and quicker to make sense of than all of the information that can be extracted from a typical balance sheet.

Because a classified balance sheet is not a formal balance sheet, there are no consistent subcategories or classifications that need to be used.

Instead, management can choose the accounts and classifications that will be most useful to its end users.

The most commonly used classifications include:

  • Current assets
  • Long-term investments
  • Fixed assets
  • Intangible assets
  • Other assets
  • Current liabilities
  • Long-term liabilities
  • Equity

When formatted with current as well as long-term classifications such as these, it can give users considerably more value than a regular balance sheet.

This allows investors and creditors to perform a more detailed analysis of the company by using measures such as the current ratio to determine its financial leverage as well as its solvency using current assets along with liabilities.

Measurements such as these would be impossible using a formal balance sheet because it lacks current and long term classifications

classified balance sheet

Example of a Classified Balance Sheet

Here is an example of a typical classified balance sheet, and as you are able to see, it contains all of the basic components in the basic accounting equation but divides them into several useful categories.

Doing this makes it much simpler to read and interpret than simply listing all of the accounts that make up assets and liabilities along with equity.

This basic format is often used outright by many businesses and is a good template to start from.

However, keep in mind that you have no particular requirements when crafting a classified balance sheet, and a company may list very different accounts that represent the maximum utility for their own purposes.

For example, a service provider will have very different accounts than a manufacturer.

Format of a Classified Balance Sheet

Let’s take a look at each of the sections that make up a typical classified balance sheet and what they typically include.

Assets

The assets section will typically contain three common subsections, which are current assets, fixed assets, and other assets.

Current assets are generally the materials which a business expects to consume within one year of the balance sheet’s date or if longer the company’s operating cycle.

This also includes prepaid expenses that will be consumed within that time frame.

Common examples of current assets include cash accounts, materials, office supplies, and merchandise inventory.

Fixed assets contain long-term assets such as land, buildings, and equipment.

These are generally assets that are used to produce goods or services for the business.

Long-term assets will generally be depreciated over a period of time, and to account for this, they will be reported with the original cost and then the corresponding accumulated depreciation.

The final section of other assets will include the resources that do not fit the other categories.

Often this includes intangible assets such as patents and copyrights.

Here are a few of the frequently used asset accounts for each category:

Current Assets:

  • Cash
  • Accounts receivables
  • Short-term investments
  • Sales Inventories
  • Supplies

Fixed Assets:

  • Property
  • Buildings
  • Machinery
  • Less: Accumulated depreciation

Other Assets:

  • Patents
  • Less: Accumulated Amortization
  • Goodwill
  • Deferred income tax

classified balance sheet

Liabilities Section

Similar to assets, the liabilities section gets divided into two primary subcategories, including current and long-term liabilities.

Current liabilities generally include debts that will be due within a year of the classified balance sheet’s date or within its operating cycle.

This will include the amount of principal that must be repaid within this time frame.

Common current liabilities include accounts payable, accrued expenses, current portions of long-term debt, and shareholder loans.

The long-term liabilities section includes debts that will not be due within one year of the classified balance sheet’s date or operating cycle.

Often these liabilities will include 5 to 30-year notes, in which case the portion that will not be due within the current liabilities period will be listed here.

A few of the most common liability accounts for these two sections include:

Current Liabilities

  • Accounts payable
  • Short term loans
  • Unearned revenue
  • Current portion of long-term debt

Long-term Liabilities

  • Notes Payable
  • Bonds payable
  • Deferred taxes payable

Equity

Equity is a very simple section of a classified balance sheet and is not very different from that of a non-classified balance sheet.

For public corporations, accounts will generally include common stock, treasury stock, additional paid-in capital, as well as retained earnings.

For sole proprietorships or general partnerships, these accounts will be different and often include member capital accounts, earnings, and contributions and distributions for the accounting period.

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  1. San Mateo Community College "A Further Look at Financial Statements" Chapter 2. November 29, 2021

  2. Harvard Business School "How to Prepare a Balance Sheet: 5 Steps for Beginners" Page 1 . November 29, 2021

  3. Clinton University New York "The Balance Sheet and Notes to the Financial Statement" Chapter 3. November 29, 2021