What is Classified Balance Sheet?
The term – Classified Balance Sheet comes from the requirement to classify Balance Sheet accounts.
This means, that Balance Sheet Accounts are being grouped together by a certain similar characteristics and then subtotals of such categories are being showed on the Balance Sheet.
Such classification has a purpose to permit users of the balance sheet to get sufficient information on the details of various balance sheet items, depending on the amounts, timing, certainty or uncertainty of the future cash flows, liquidity and other. Usually separate categories of the balance sheet provide even more comprehensive information comparing to the total amounts of the assets, liabilities and equity.
Examples can be: separation of assets used in operations from the assets held for sale, leased assets are also classified separately due to the fact, that they are subject to restrictions. Assets are also classified separately depending on their liquidity, i.e. ability of the business to convert items into cash.
As mentioned before, Balance Sheet includes 3 major items:
- Assets
- Liabilities
- Equity
In the Classified Balance Sheet these items are further classified into the following categories:
Assets:
- Current Assets
- Long-term Investments
- Property, Plant & Equipment
- Intangible Assets
- Other Assets
Liabilities & Owners’ Equity:
- Current Liabilities
- Long-Term Liabilities
- Owners’ Equity
Below there is an example of Classified Balance Sheet
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