Classified Balance Sheet-
Classified balance sheet?
Classified balance sheet refers to a financial statement in which assets, liabilities and equity are shown by dividing them into different classes, sub-sections, So that all the items of the balance sheet are easily understandable to the users of the financial statements.
Classified balance sheet means a financial statement showing the financial position of the business, in which the assets, liabilities and equity are shown in a systematic manner by dividing them into different classes and sub-sections,subcategories.
The major items of the classified balance sheet
Assets- Assets are valuable and economic resources of an enterprise useful in its operations. Assets can be broadly classified as follows :
(a) Fixed Assets Or Non current Assets : Non-Current Assets are those assets which are hold for long period and used for normal business operation to earn revenue.
Examples of such assets are – Land, Building, Machinery plant, furniture and Goodwill, Motor Vehicle etc. They are further classified into:
1.Tangible Assets : Tangible Assets are those assets which have physical existence and can be seen and touched. Or These are the assets that can be seen, touched and have certain volume.
For Example: Land, Building ,Furniture, Machinery, plant, Motor Vehicles, computer, etc.
2.Intangible Assets : Intangible Assets are those assets which have no physical existence and can be felt by operation can not be seen and touched.
Assets which can neither be seen nor touched and have no volume are called intangible assets. For example: Goodwill, Patent, Trade mark, copy right, software etc.
3.Wasting Assets : These are the assets which exhaust or reduce in value by their use. Mines, quarries etc come under this category.
(b) Current Assets : Current Assets are those assets which are held for short period and can be converted into cash within one year. The balance of such items goes on fluctuating i.e. it keeps on changing throughout the year.
These are the assets which are acquired by the business either for resale or for converting them into cash. These are normally realised within a period of one year. For example: Debtors, Inventory, Bills Receivable, Loose tools, spare parts, Cash in hand, cash at Bank, Account receivable etc.
(C) Liquid Assets : These are the assets which are either in cash or can be easily converted into cash. For example cash in hand, cash at bank, Debtors , Bills receivable , Marketable securities etc.
(D) Fictitious Assets : These are not the real assets. These are the items of such expenses and losses which have not been written off in full. For example, preliminary expenses, underwriting commission, etc
Liabilities- Liabilities are obligations or debts that an enterprise has to pay after some time in the future. Liabilities can be broadly classified as follows :
(a) Long term Liabilities Or Non-Current Liabilities : These are the liabilities which are not payable during the current accounting year. Or Non-Current Liabilities are those obligations or debts that are payable after a period of one year.
Generally, the funds raised through such means are used for purchase of fixed assets. Examples of such liabilities are loan on mortgage, loan from financial institutions, Loan from Bank.
(b) Current Liabilities : These are the liabilities which are payable during the current year. Or Current Liabilities are obligations or debts that are payable within a period of one year . These include Bank overdraft, trade creditors, bill payable, short term loan, Account payable etc.
(c) Owners’ Funds Or Owner’s Equity Or stockholder’s Equity : The amount owing to the proprietor or proprietors is called owners’ funds. As per business entity concept this is a liability of the business. Apart from capital it also includes undistributed profits and reserves. Amount of drawings by the proprietor is deducted from it.
Stockholders’ equity include common stock, paid-in capital, retained earnings, and treasury stock.
Stockholders’ equity = Total Assets – Total liabilities
Stockholders’ equity = common stock+paid in capital+retained earnings+ treasury stock.
Classified balance sheet
Also read : Format of Trading Account
Objectives of Classified balance sheet
1. To know the nature and value of assets of the business
2. To ascertain the total liabilities of the business.
3. To know the position of owner’s equity.
4. Easily to understand and analyze.
5. Easily ascertain the position of assets.
6. Easily to understand profit and Loss.
Format Of Classified Balance Sheet
NATHAN & BROTHER
MARCH 31 st , 2021
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