This document provides information and an example of how to prepare a classified balance sheet for a trading business. It defines current assets as assets that will be turned into cash or used up within 12 months, such as cash at bank, and non-current liabilities as obligations due after 12 months, such as a mortgage. Items are classified in the balance sheet according to the principle of relevance, so that the information influences decision making, such as prioritizing short-term vs long-term liability payments. An example classified balance sheet is given for Ray's Radios, listing current assets, non-current assets, current liabilities, non-current liabilities, and owner's equity sections.

1. VCE ACCOUNTING
UNIT 3 – RECORDING AND REPORTING FOR A TRADING BUSINESS
CHAPTER 2 – BALANCE SHEETS
© Michael Allison
Author’s express permission required for external or professional use
Page | 1
Student50
Task 2B Classified Balance Sheets
a) Define the following terms and give an example of each from the information provided.
 Current Assets
Define
1 mark
 Assets that will be turned into cash and/or used up by the business within the next 12
months
Example 1 mark Cash at bank
1 + 1 = 2 marks
 Non-Current Liabilities
Define
1 mark
 Obligations of the business that are due for payment after the next 12 months.
Example 1 mark Mortgage
1 + 1 = 2 marks
b) With reference to a qualitative characteristic of accounting, explain why items are classified in
the Balance Sheet.
Explanation
Identify
1 mark
 Relevance
Define
1 mark
 All information which influences the decision-making of the firm should be included in the
financial reports.
Relate
1 mark
 In this case, classifying the items in the Balance Sheet assist the firm in its decision-making.
 For example, the firm can see which Liabilities are due for payment within 12 months and
those beyond 12 months, enabling it to prioritise payments.
3 marks

2. VCE ACCOUNTING
UNIT 3 – RECORDING AND REPORTING FOR A TRADING BUSINESS
CHAPTER 2 – BALANCE SHEETS
© Michael Allison
Author’s express permission required for external or professional use
Page | 2
c) Prepare a Classified Balance Sheet for the business as at 30 September 2015.
Ray’s Radios: Balance Sheet as at 30 September 2015
$ $ $ $
Current Assets Current Liabilities
Cash at bank 1300 Tax bill 700
Debtors 1800 Creditors 3800
Stock 31000 34100 Loan – GUD Money 6000 10500
Non-Current Assets Non-Current Liabilities
Fixtures and fittings 35000 Mortgage 80000
Vehicles 80000 Loan – GUD Money 26000 106000
Computer equipment 18400 133400
Owner’s Equity
Capital 51000
TOTAL ASSETS 167500 TOTAL EQUITIES 167500
18 marks
Marks:
 1 mark for each figure and total
Total /25 marks