Balance Sheet Definition & Examples Assets = Liabilities + Equity

classified balance sheet categories

A classified balance sheet is a type of balance sheet presented so that the sub-components of assets, liabilities, and equity are presented so that the readers understand the items of the financial statements. The classifications used will vary depending on the type of business you own, and there is no one way to format a classified balance sheet properly. The chart below lists common balance sheet classifications and examples of the balance sheet accounts that are included in each classification. A classified balance sheet is important because it provides a snapshot of a company’s financial position. This information can be used by investors, creditors, and other interested parties to make informed decisions about whether to invest in or lend to the company.

It is useful for constructing trend lines to examine the relative changes in the size of different accounts. The balance sheet is part of the financial statements issued by a business, informing the reader of the amounts of assets, liabilities, and equity held by the entity as of the balance sheet date. The more common are the classified, common size, comparative, and vertical balance sheets. A classified balance sheet presents information about an entity’s assets, liabilities, and shareholders‘ equity that is aggregated (or „classified“) into subcategories of accounts.

Format Of Classified Balance Sheet

However, it is potentially impossible in a classified balance sheet. From the tax payable to cash available, all information is presented. Share capital is the capital raised by a business to fund the business activities. It further includes initial paid-up capital and additional paid-up capital.

classified balance sheet categories

For example, in the balance sheet above, equipment and fixtures are listed together under assets in the amount of $17,200. On the classified balance sheet below, equipment and furniture are listed separately under a fixed asset category instead of just being listed as assets. While some of classified balance sheet the differences between unclassified and classified balance sheets are in the formatting, classified balance sheets are designed to display details. The classifications used can be unique to certain specialized industries, and so will not necessarily match the classifications shown here.

Purpose of a Classified Balance Sheet

This means that when you add all classifications of assets, it shall be equal to the sum of all classifications of equity and liabilities. There are no set criteria on how many sub-categories can be created and it will ultimately depend on what level of detail is required by the management. The two most common categories that are used in a classified balance sheet are current and long-term. Contrastingly, if you want a quick snapshot of your business’s performance, an unclassified balance sheet could be more easily digestible.

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