A classified balance sheet is a financial statement that

reports asset, liability, and equity accounts in

meaningful subcategories for readers’ ease of use. In
other words, it breaks down each of the balance sheet
accounts into smaller categories to create a more useful
and meaningful report.
There’s no standardized set of subcategories or
required amount that must be used. Management can
decide what types of classifications to use, but the
most common tend to be current and long-term.
 This format is important because it gives end users
more information about the company and its
operations. Creditors and investors can use these
categories in their financial analysis of the business.
For instance, they can use measurements like the
current ratio to assess the company’s leverage and
solvency by comparing the current assets and liabilities.
This type of analysis wouldn’t be possible with a
traditional balance sheet that isn’t classified into
current and long-term categories.
 The assets section is typically broken down into three main
subcategories: current, fixed assets, and other.
 Current assets include resources that are consumed or used
in the current period. Cash and accounts receivable the most
common current assets. Also, merchandise inventory is
classified on the balance sheet as a current asset.
 Fixed assets consist of property, plant, and equipment that
are long-term in nature and are used to produce goods or
services for the company. These long-term assets are
typically depreciated over time and reported at their
historical cost along with the associated accumulated
depreciation.
 The other assets section includes resources that don’t fit
into the other two categories like intangible assets. Here’s a
list of the most common assets found in each section
 Current Assets
Cash
Accounts receivables
Prepaid expenses
Inventories
Investments held for sale
 Fixed Assets
Furniture and fixtures
Leasehold improvements
Buildings
Vehicles
Less: Accumulated depreciation
 Other Assets
Copyrights
Trademarks
Less: Accumulated Amortization
Goodwill
 The liabilities section is typically broken into two
subcategories: current, long-term debt.
 Current liabilities include all debts that will become
due in the current period. In other words, this is the
amount of principle that is required to be repaid in the
next 12 months. The most common current liabilities
are accounts payable and accrued expenses.
 The long-term section lists the obligations that are not
due in the next 12 months. These obligations could be
5, 10, or 30-year notes. Keep in mind a portion of these
long-term notes will be due in the next 12 months.
Thus, this portion is always reported in the current
section.
 Current Liabilities
Accounts payable
Accrued expenses
Current portion of long-term debt
 Long-term Liabilities
Commercial loans payable
Mortgages payable
Deferred taxes payable
 The equity section of a classified balance sheet is very
simple and similar to a non-classified report. Common
stock, additional paid-in capital, treasury stock, and
retained earnings are listed for corporations.
Partnerships list member capital accounts,
contributions, distributions, and earnings for the period.
 account amount
cash 100,000
Short term investments 50,000
Accounts receivable 75,000
Inventories 200,000
Prepaid insurance 25,000
Stock investments 40,000
equipment 150,000
Acc. depreciation 50,000
land 25,000
goodwill 275,000
Acc. amortization 55,000
 account amount
Accounts payable 80,000
Salaries payable 10,000
Interest payable 15,000
Taxes payable 25,000
Notes payable 135,000
Bank loan 75,000
Mortgages payable 35,000
Capital stock 300,000
Retained earnings 160,000
1- prepare the classified balance sheet for XYZ company
2- calculate the following financial ratios:
Current ratio
Quick ratio
Working capital
ROE
ROA (assuming that net income=850,000)