TOPIC 8: BALANCE SHEET (CLASSIFIED) | B/KEEPING FORM 3
Meaning of 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.
- Current assets
- Long-term investments
- Fixed assets (or Property, Plant, and Equipment)
- Intangible assets
- Other assets
- Current liabilities
- Long-term 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 – BALANCE SHEET
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:
- Cash and cash equivalents
- Trade and other receivables
- Prepaid expenses
- Investments
- Inventories
- Assets held for sale
- Investments in other companies
- Computer hardware
- Computer software
- Furniture and fixtures
- Leasehold improvements
- Office equipment
- Production equipment
- Accumulated depreciation
- Intangible assets
- Accumulated amortization
- Goodwill
- Trade and other payables
- Accrued expenses
- Current tax liabilities
- Current portion of loans payable
- Other financial liabilities
- Liabilities held for sale
- Loans payable
- Deferred tax liabilities
- Other non-current liabilities
- Capital stock
- Additional paid-in capital
- Retained earnings
Prepare 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 |
