Classified balance sheet
/What is a Classified 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 include 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.
There is no standardized classification system. Instead, a business can choose which accounts will be included in each balance sheet line item. The most common classifications used within a classified balance sheet are as follows:
Current assets. Includes all assets likely to be liquidated within one year, such as accounts receivable and inventory.
Long-term investments. Includes any investments that are unlikely to be liquidated in less than one year, such as an investment in a rental property.
Fixed assets (or Property, Plant, and Equipment). Includes higher-cost items that are likely to provide value for more than one year, such as buildings, machinery, vehicles, and computer systems.
Intangible assets. Includes any assets that have no physical substance, such as copyrights, trademarks, and patents.
Other assets. Includes any assets that do not readily fall into one of the preceding asset categories.
Current liabilities. Includes all liabilities likely to be settled within one year, such as accounts payable and property taxes payable.
Long-term liabilities. Includes all liabilities that will not be settled within one year, such as notes payable.
Shareholders' equity. Includes the amounts paid into a business by investors, plus any retained earnings. This classification includes common stock, preferred stock, additional paid-in capital, treasury stock, and retained earnings.
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The sum of these classifications must match this formula (known as the accounting equation):
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.
Common Balance Sheet Classifications
There is no specific requirement for the classifications to be included in the balance sheet. The following items, at a minimum, are normally found in a balance sheet:
Current Assets:
Investments
Assets held for sale
Long-Term Investments:
Investments in other companies
Fixed Assets:
Computer hardware
Computer software
Production equipment
Intangible Assets:
Current Liabilities:
Current tax liabilities
Current portion of loans payable
Other financial liabilities
Liabilities held for sale
Long-Term Liabilities:
Deferred tax liabilities
Other non-current liabilities
Shareholders' Equity:
Example of a Classified Balance Sheet
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/x2 | as of 12/31/x1 |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | $270,000 | $215,000 |
| Trade receivables | 147,000 | 139,000 |
| Inventories | 139,000 | 128,000 |
| Other current assets | 15,000 | 27,000 |
| Total current assets | 571,000 | 509,000 |
| Fixed assets | ||
| Furniture and fixtures | 551,000 | 529,000 |
| Leasehold improvements | 82,000 | 82,000 |
| Office equipment | 143,000 | 143,000 |
| Total non-current assets | 776,000 | 754,000 |
| Total assets | $1,347,000 | $1,263,000 |
| LIABILITIES AND EQUITY | ||
| Current liabilities | ||
| Trade and other payables | $217,000 | $198,000 |
| Short-term borrowings | 133,000 | 202,000 |
| Current portion of long-term borrowings | 5,000 | 5,000 |
| Current tax payable | 26,000 | 23,000 |
| Accrued expenses | 9,000 | 13,000 |
| Total current liabilities | 390,000 | 441,000 |
| Long-term liabilities | ||
| Long-term debt | 85,000 | 65,000 |
| Deferred taxes | 19,000 | 17,000 |
| Total non-current liabilities | 104,000 | 82,000 |
| Total liabilities | 494,000 | 523,000 |
| Shareholders’ Equity | ||
| Capital | $100,000 | $100,000 |
| Additional paid-in capital | 15,000 | 15,000 |
| Retained earnings | 738,000 | 625,000 |
| Total equity | 853,000 | 740,000 |
| Total liabilities and equity | $1,347,000 | $1,263,000 |