A classified balance sheet organizes accounts into four main categories: current assets, fixed assets, current liabilities, and long-term liabilities. This helps present information in a more structured way based on how long an asset will be with the company or how long a liability must be paid. Current assets will be used within a year, fixed assets last over a year, current liabilities are due within a year, and long-term liabilities are due in over a year. The classified balance sheet clearly shows these divisions to analyze items like working capital and current ratios.

1. The Classified Balance Sheet
Classified as in
“ordered” not as
in “secret”

2. Account-form v. Report-form
Info is side-by-side,
horizontal
Info is one-above-the-other,
vertical

3. • Classified Balance Sheet
– An improved way to present B/S info
Basically it organizes the accounts that go on a
balance sheet under 4 headings:
Current Assets –will be used up within a year
Fixed Assets – will last longer than a year
Current Liabilities –will be paid off in a year
Long-term Liabilities –paid off in longer than a year

4. •Working Capital  the difference between the
current assets and current liabilities of a
business
• More working capital is better
• This is a measure of financial health

5. • Current Ratio current assets divided by
current liabilities
• Shows if a business has enough current assets
to cover their current liabilities
• Expressed as a ratio ie 1.2:1 or 0.75:1, etc
• 1.2:1 means that the business has $1.20 in
current assets for every $1 of current liabilities
– this is positive
• 0.75:1 mean they only have 75 cents for each
dollar owed

6. 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 theOften, 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:
1.1. Current AssetsCurrent Assets (which will be used within one year) and(which will be used within one year) and
2.2. Fixed AssetsFixed Assets (which will remain after one year.)(which will remain after one year.)
Liabilities should also be divided into two categories:Liabilities should also be divided into two categories:
1.1. Current LiabilitiesCurrent Liabilities (Must be paid within one year.) and(Must be paid within one year.) and
2.2. Long-term LiabilitiesLong-term Liabilities (Will take longer than a year to pay.)(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.)
It is updated with the result of Net Income (Loss) and DrawingsIt is updated with the result of Net Income (Loss) and Drawings

7. Current Assets
Bank 1,873.00$
Accounts Receivable 12,000.00
Supplies 1,250.00 15,123.00
Fixed Assets
Equipment 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.

8. Current Assets
Bank 2,873.00$
Accounts Receivable 12,000.00
Supplies 1,250.00 16,123.00
Fixed Assets
Equipment 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.

9. 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.

10. Bank 5,110.00$
Accounts Receivable 12,000.00
Supplies 1,250.00 18,360.00
Fixed Assets
Equipment 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 Liabilities
Bank Loan 12,000.00$
Accounts Payable 5,200.00
HST Payable 700.00$
Less: HST Recoverable 240.00 460.00 17,660.00
Long-Term Liabilities
Mortgage 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
In summary…
Section totals
go in the far
right column.
Accounts that
need to be off
set in order to
create a “net”
figure go in
the far left
column.
And
everything
else goes in
the middle
column!