Learning Objective 1: Identify the Sections of a classified Balance Sheet

The Classified Balance Sheet

• Presents a snapshot at a point in time

• To improve understanding, companies group similar assets and similar liabilities together.

Standards Classifications

Assets

Current assets

Long-term investments

Property, plant, and equipment

Intangible assets

Liabilities and Stockholders’ Equity

Current liabilities

Long-term liabilities

Stockholders’ Equity

Blank

Nature of Current Assets

• Assets a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer

• Common types include cash, investments, receivables, inventories, and prepaid expense

•  Operating cycle

  • Average time it takes from purchase of inventory, to sale of goods, and then to collection of cash from customers.

Components of Long-Term Investments

• Investments in stocks and bonds of other corporations that are held for more than one year

• Long-term assets such as land or buildings that a company is not currently using in its operating activities.

• Long-term notes receivable

Nature of Property, Plant & Equipment 

• Asset with long useful lives

• Currently used in operations

• Includes land, buildings, equipment, delivery vehicles, and furniture

• Are depreciated

  • Cost is allocating to a number of years

• Accumulated depreciation

  • Total amount of depreciation expensed to date in an asset’s life

Nature of Intangible Assets

• Assets that do not have physical substance 

• Includes goodwill, patents, copyrights, and trademarks or trade names

Helpful Hint

Sometimes intangible assets are reported under a broader heading called “Other assets.”

Nature of Current Liabilities

• Obligations the company is to pay within the next year or operating cycle, whichever is longer

• Common examples

  • Accounts payable, salaries and wages payable, notes payable, interest payable, and income taxes payable

  • And current maturities of long-term obligations

    • Payments to be made within the next year on long-term obligations

Nature of Long-term Liabilities

• Obligations of a company expects to pay after one year

• Include bond payable, mortgages payable, long-term notes payable, lease liabilities, and pension liabilities

Stockholders’ Equity

Components of stockholders’ equity

• Common stock

  • Investments of assets into the business by the stockholders

• Retained earnings

  • Income retained for use in the business