The Classified The Classified Balance SheetBalance Sheet

What are we Supposed to do What are we Supposed to do with All those with All those

Columns!?!Columns!?!

A classified Balance Sheet “classifies” accounts into various sub-categories. A classified Balance Sheet “classifies” accounts into various sub-categories. Often, these categories are related to how long an asset will be with the 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. company, or how long we have before a liability must be paid.

Let's look at the basic classifications: Let's look at the basic classifications:

Assets are normally divided into two categories:Assets are normally divided into two categories:

1. Current Assets (which will be used within one year), and1. Current Assets (which will be used within one year), and

2. Fixed Assets (which will remain after one year.)2. Fixed Assets (which will remain after one year.)

Liabilities should also be divided into two categories:Liabilities should also be divided into two categories:

1. Short-term Liabilities (Must be paid within one year.), and1. Short-term Liabilities (Must be paid within one year.), and

2. Long-term Liabilities (Will take longer than a year to pay.)2. Long-term Liabilities (Will take longer than a year to pay.)

Owner's equity remains the same as always. (It's not classified.)Owner's equity remains the same as always. (It's not classified.)

Current AssetsBank 1,873.00$ Accounts Receivable 12,000.00 Supplies 1,250.00 15,123.00

Fixed AssetsEquipment 18,500.00$ Office Building 100,000.00 118,500.00

Total Assets 133,623.00$

ASSETS

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.

Total Current Assets

Total Fixed Assets

Total Assets

Every section total will go in the far right column.

Current AssetsBank 2,873.00$ Accounts Receivable 12,000.00 Supplies 1,250.00 16,123.00

Fixed AssetsEquipment 18,500.00$ Less: Accumulated Depreciation 2,000.00 16,500.00 Office Building 100,000.00 Less: Accumulated Depreciation 4,000.00 96,000.00 112,500.00 Total Assets 128,623.00$

ASSETS

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.

Regular account balances, and any adjusted “net

figures” go in the middle column.

A Closer Look at Long-Term Liabilities

Liabilities

Short Term Liabilities:Bank Loan Payable 10,000.00$ Accounts Payable 4,000.00 Mortgage Payable, Current Portion 6,000.00 20,000.00$

Long-Term Liabilities:Mortgage Payable 86,000.00$ Less: Current Portion 6,000.00 80,000.00

Total Liabilities 100,000.00$

Some of our mortgage payable needs to be paid within one year. Imagine a

$500.00 monthly payment...

The current portion is deducted from the long-term amount to create a net figure.

Current AssetsBank 5,110.00$ Accounts Receivable 12,000.00 Supplies 1,250.00 18,360.00

Fixed AssetsEquipment 18,500.00$ Less: Accumulated Depreciation 2,000.00 16,500.00 Office Building 100,000.00 Less: Accumulated Depreciation 4,000.00 96,000.00 112,500.00 Total Assets 130,860.00$

Short-Term LiabilitiesBank Loan 12,000.00$ Accounts Payable 5,200.00 GST Payable 700.00$ Less: GST Recoverable 240.00 460.00 17,660.00

Long-Term LiabilitiesMortgage Payable 90,000.00

A.Lighstone, Capital 20,000.00$ Net Income 4,000.00$ Drawings 800.00 Increase in Equity 3,200.00 Balance June 30 23,200.00

Total Liabilities and Owner's Equity 130,860.00$

LIABILITIES AND OWNER'S EQUITY

ASSETS

In summary…

Section totals go in the far right column.

Accounts that need to be adjusted in

order to create a “net” figure go in the far left column.

And everything

else goes in the middle

column!

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!!!Thanks for listening!!!