Classified Balance Sheet 4-23

Classified Balance Sheet

LEARNING OBJECTIVE 4
Identify the sections of a classified balance sheet.

The balance sheet presents a snapshot of a company’s financial position at a point in time.
To improve users’ understanding of a company’s financial position, companies often use a
classified balance sheet. A classified balance sheet groups together similar assets and simi-
lar liabilities, using a number of standard classifications and sections. This is useful because
items within a group have similar economic characteristics. A classified balance sheet gener-
ally contains the standard classifications listed in Illustration 4.20.

Assets Liabilities and Owner’s Equity ILLUSTRATION 4.20

Current assets Current liabilities Standard balance sheet

Long-term investments Long-term liabilities classifications
Property, plant, and equipment Owner’s (Stockholders’) equity
Intangible assets

These groupings help financial statement readers determine such things as (1) whether HELPFUL HINT
the company has enough assets to pay its debts as they come due, and (2) the claims of short-
Recall that the basic ac-
and long-term creditors on the company’s total assets. Many of these groupings can be seen in counting equation is Assets =
the balance sheet of Franklin Company shown in Illustration 4.21 (see Helpful Hint). In the Liabilities + Owner’s Equity.
sections that follow, we explain each of these groupings.

Franklin Company ILLUSTRATION 4.21

Balance Sheet Classified balance sheet
October 31, 2020
Assets
Current assets
Cash $ 6,600
Debt investments 2,000
Accounts receivable 7,000
Notes receivable 1,000
Inventory 3,000
Supplies 2,100
Prepaid insurance 400
Total current assets $22,100
Long-term investments
Stock investments 5,200
Investment in real estate 2,000 7,200
Property, plant, and equipment
Land 10,000
Equipment $24,000
Less: Accumulated depreciation—
equipment 5,000 19,000 29,000
Intangible assets
Patents 3,100
Total assets $61,400