Classified Balance Sheet
groups together similar assets and similar liabilities, using a number of standard classifications and sections
A classified balance sheet is a financial statement that reports a company’s assets, liabilities, and equity in a way that groups them into categories based on their liquidity or maturity. It helps users of the financial statements to easily understand how much money the company has, how much it owes, and how much equity the owners have invested in the business.
The assets section of a classified balance sheet usually starts with the most liquid assets and ends with the least liquid. Cash and cash equivalents are typically listed first, followed by short-term investments, accounts receivable, inventory, and property, plant, and equipment.
The liabilities section of a classified balance sheet is divided into current and non-current liabilities. Current liabilities are those that must be paid within one year, while non-current liabilities have a maturity date of more than one year. Examples of current liabilities include accounts payable, short-term loans, and accrued expenses. Examples of non-current liabilities include long-term loans and bonds.
The equity section of a classified balance sheet typically shows the amount of money that the owners have invested in the business, either through stock or capital contributions. Retained earnings, which represent the cumulative profits of the business that have been retained by the company, are also included in the equity section.
In summary, a classified balance sheet helps to provide a more detailed picture of a company’s financial position by grouping similar assets and liabilities together in a way that makes it easier to analyze the information. It is an essential tool for investors, lenders, and other stakeholders who want to understand the financial health of a company.
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