The Classified
Balance Sheet
What are we Supposed to do
with All those Columns!?!
A classified Balance Sheet “classifies” accounts into various sub-categories.
Often, these categories are related to how long an asset will be with the
company, or how long we have before a liability must be paid.
Let's look at the basic classifications:
Assets are normally divided into two categories:
1. Current Assets (which will be used within one year), and
2. Fixed Assets (which will remain after one year.)
Liabilities should also be divided into two categories:
1. Short-term Liabilities (Must be paid within one year.), and
2. Long-term Liabilities (Will take longer than a year to pay.)
Owner's equity remains the same as always. (It's not classified.)
Once we divide our Assets and Liabilities into these categories,
the columns become much easier to understand. You see, for
every classification (ie. Assets, Current Assets, etc. ) we have to
indicate a section title and a section total on the Balance Sheet.
Every section total will go in the far right column.
ASSETS
Current Assets
Bank
Accounts Receivable
Supplies
$
1,873.00
12,000.00
1,250.00
15,123.00
$ 18,500.00
100,000.00
118,500.00
Total Current Assets
Fixed Assets
Equipment
Office Building
Total Assets
Total Fixed Assets
Total Assets
$ 133,623.00
Once we start listing CONTRA accounts, then we will place the
contra account, as well as the account that it is contradicting, in
the far left column.
These accounts need to
be adjusted to create a
“net figure.” Thus, they
are placed in the far left
column.
ASSETS
Current Assets
Bank
Accounts Receivable
Supplies
Fixed Assets
Equipment
$ 18,500.00
Less: Accumulated Depreciation
2,000.00
Office Building
100,000.00
Less: Accumulated Depreciation
4,000.00
Total Assets
Regular account balances,
and any adjusted “net
figures” go in the middle
column.
$
2,873.00
12,000.00
1,250.00
16,123.00
16,500.00
96,000.00
112,500.00
$ 128,623.00
A Closer Look at Long-Term Liabilities
Some of our mortgage
payable needs to be paid
within one year. Imagine a
$500.00 monthly payment...
Liabilities
Short Term Liabilities:
Bank Loan Payable
Accounts Payable
Mortgage Payable, Current Portion
$ 10,000.00
4,000.00
6,000.00
$ 20,000.00
Long-Term Liabilities:
Mortgage Payable
Less: Current Portion
$ 86,000.00
6,000.00
80,000.00
Total Liabilities
The current portion is
deducted from the long-term
amount to create a net figure.
$ 100,000.00
In summary…
Section totals
go in the far
right column.
ASSETS
Current Assets
Bank
Accounts Receivable
Supplies
Accounts that
need to be
adjusted in
order to create
a “net” figure
go in the far
left column.
$
Fixed Assets
Equipment
Less: Accumulated Depreciation
Office Building
Less: Accumulated Depreciation
Total Assets
18,360.00
16,500.00
96,000.00
112,500.00
$ 130,860.00
LIABILITIES AND OWNER'S EQUITY
Short-Term Liabilities
Bank Loan
Accounts Payable
GST Payable
Less: GST Recoverable
And
everything
else goes in
the middle
column!
$ 18,500.00
2,000.00
100,000.00
4,000.00
5,110.00
12,000.00
1,250.00
$ 12,000.00
5,200.00
$
700.00
240.00
460.00
Long-Term Liabilities
Mortgage Payable
A.Lighstone, Capital
Net Income
Drawings
Increase in Equity
Balance June 30
Total Liabilities and Owner's Equity
17,660.00
90,000.00
$ 20,000.00
$
4,000.00
800.00
3,200.00
23,200.00
$ 130,860.00
Once you memorize the accounts that are adjusted in order to
arrive at a “net figure” (ie. accounts that are associated with a
CONTRA account, individual account receivables, individual
account payables, and Net Income and Drawings) it’s pretty easy
to prepare a “Classified Balance Sheet.”
Please see page #270 for a good example of a classified
balance sheet.
Thanks for listening!!!