Accounting: Classified Balance Sheet

Accounting: Classified Balance Sheet

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The classified balance sheet gives a more detailed look at the business. On a classified balance sheet, individual assets and liabilities are placed into specific categories. Assets are listed from most to least liquid. (Liquidity is how quickly an asset can be converted into cash.) Liabilities are listed in the order in which they have to be paid.

On a classified balance sheet, assets are either current or long-term. Any asset that will be used up or converted to cash within the next fiscal year is classified as a current asset. Note that the fiscal year does not always begin in January, but it always contains twelve consecutive months.

Long-term assets are those which the business intends to hold for at least a year. The three main categories of long-term assets are Long-term Investments; Intangible Assets; and Property, Plant, and Equipment. The assets that are used in business operations over a long period of time are collectively referred to as Property, Plant, and Equipment. Land is the first account listed under Property, Plant, and Equipment on a classified balance sheet.

Current Liabilities and Long-term Liabilities are the two liability categories listed on the classified balance sheet. Current liabilities are due either within a year or within the operating cycle, whichever is longer. The operating cycle is the interval within which a business buys goods and services, sells them to customers, and receives payment. Current Liabilities include Accounts Payable, Salaries Payable, and Unearned Revenue.

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