The document discusses how to prepare a classified balance sheet. It explains that assets and liabilities should be classified and arranged in order of either permanence or liquidity. Current assets are those expected to be converted to cash within one year, while non-current assets will provide long-term benefits. Similarly, current liabilities are due within one year and non-current liabilities are long-term debts. The document provides examples of common asset and liability line items and demonstrates how they would be arranged in the two styles of a classified balance sheet.

1. Classified Balance
Sheet
Section 2 Objective 9
o Arrange assets and
liabilities in order of
• Permanence
• Liquidity
o Prepare balance sheet

2. Classified Balance Sheet
• The Balance Sheet shows a
listing of a firm’s assets,
liabilities and capital at a
particular date
• Assets and Liabilities in a
balance sheet are classified
and shown in categories
• The assets and liabilities can
be arranged in order of
permanence or liquidity

4. Classified Balance Sheet

5. • Assets
– Assets are classified into
two categories.
• Current assets are assets
owned by the business for a
short period time. They are
quickly turned into cash
within one year. Examples of
current assets include cash
in hand, cash at bank,
inventory and accounts
receivable (debtors)
• Non-currents assets are
those which a business
intends to keep and used to
generate income for a long
period of time (for more than
one year). Examples of non-
current assets include
premises, machinery,
equipment and vehicles
Classified Balance
Sheet

6. Classified Balance Sheet

7. • Liabilities
– Liabilities are classified
into two categories.
• Current liabilities are
sums of money owed to
individuals or firms which
will be settled in less than
one year. Examples of
current liabilities are
accounts payable
(creditors) and bank
overdraft
• Non-current liabilities are
sums of money owed to
individuals or firms which
will be settled in more
than one year. Examples
of non-current liabilities
are mortgage loans and
bank loans
Classified Balance
Sheet

8. Classified Balance Sheet

9. The date at which it is being prepared
e.g. as at February 28, 2017
When preparing the balance sheet, show the following information in
the heading:
The name of the organisation
e.g. DB Enterprises
The name of the financial statement
e.g. Balance Sheet
(ask you self these
questions?)
Classified Balance Sheet

10. • Presentation of the Balance Sheet – Style
– Assets and Liabilities in a Balance Sheet can
be arranged in two styles.
– The styles are order of permanence and order
of liquidity:
• Order of permanence presentation in the balance
sheet, assets are placed first.
• It reflects the length of time each asset is expected
to benefit.
Classified Balance Sheet

11. • Non-current assets are placed first, starting with the asset that will
last longer than one year
• Current assets are shown in the following order of permanency
– Inventory
– Receivables (Debtors)
– Bank
– Cash
• In the other half of the balance sheet, the capital and liabilities
categories are shown in the following order permanency:
• Capital
• Non-current liabilities
• Current liabilities
Classified Balance Sheet

12. Classified Balance Sheet
order of permanenceEXAMP LE OF S IMP LE B ALAN CE S H EET
SB. E n terprises $ $ $
Ba la n ce Sh eet a s a t 31 J u ly 2018
N o n -c u rre n t As s e ts
La n d & Bu ildin g *
F ixtu res a n d F ittin gs *
E qu ipm en t * **
Cu rre n t As s e ts
In ven tory *
Accou n ts receiva ble *
Ca sh a t ba n k *
Ca sh in h a n d * ** ***
Ca pita l **
N o n -Cu rre n t Lia bility
Mortga ge *
Ba n k Loa n * **
Cu rre n t Lia bility
Accou n ts pa ya bles *
Ba n k overdra ft * ** ***

13. • Balance sheet style of presentation for order of liquidity:
– shows the assets (that is current assets) which are already in cash
form first
– and the assets which are more difficult to convert to cash in the near
future last.
• The order of presentation starts with cash in hand and ends
with inventories or prepaid expenses.
• For the other half of the balance sheet, current liabilities will
be shown before non-current liabilities and capital will be
placed last.
Classified Balance Sheet

14. Classified Balance Sheet
order of liquidity
EXAMP LE OF S IMP LE B ALAN CE S H EET
SB. E n terprises $ $ $
Ba la n ce Sh eet a s a t 31 J u ly 2018
Cu rre n t As s e ts
Ca sh in h a n d *
Ca sh a t ba n k *
Accou n ts receiva bles *
In ven tory * **
N o n -c u rre n t As s e ts
E qu ipm en t *
F ixtu res a n d F ittin gs *
La n d a n d Bu ildin g * ** ***
Cu rre n t Lia bility
Accou n ts pa ya bles *
Ba n k overdra ft * **
N o n -Cu rre n t Lia bility
Ba n k Loa n *
Mortga ge * **
Ca pita l ** ***

15. When preparing a Balance Sheet
• Show the following information on
the balance sheet
– The name of the firm
– The name of the financial
statement
– The date at which it is being
prepared
• Use either the style of order or
presentation or order for liquidity
(not both together)
• Total each part of the balance sheet
Classified Balance Sheet

16. • Look at the link on the
next slide and watch the
video on creating a simple
balance sheet
• Create a Simple Balance
Sheet
Ptionline division
https://www.youtube.com/w
atch?v=QYA0GiSQ524
Simple Balance Sheet