The Classified Balance Sheet

The Classified Balance Sheet - The Classified Balance Sheet...

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The Classified Balance Sheet A classified balance sheet groups together similar assets and similar liabilities, using a number of standard classifications and sections. This is useful because items within a group have similar economic characteristics. A classified balance sheet generally contains the standard classifications listed in Illustration 2-1 . Illustration 2-1 Standard balance sheet classifications These groupings help readers determine such things as (1) whether the company has enough assets to pay its debts as they come due, and (2) the claims of short- and long-term creditors on the company's total assets. Many of these groupings can be seen in the balance sheet of Franklin Corporation shown in Illustration 2-2 . In the sections that follow, we explain each of these groupings.
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Illustration 2-2 Classified balance
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sheet Helpful Hint Recall that the accounting equation is Assets = Liabilities + Stockholders' Equity. Current Assets Current assets are assets that a company expects to convert to cash or use up within one year or its operating cycle, whichever is longer. In Illustration 2-2 , Franklin Corporation had current assets of $22,100. For most businesses the cutoff for classification as current assets is one year from the balance sheet date. For example, accounts receivable are current assets because the
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This document was uploaded on 11/03/2011 for the course ACCOUNTING ac 201 at Montgomery.

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The Classified Balance Sheet - The Classified Balance Sheet...

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