Topic

Classified balance sheet

Instructions

What is a classified balance sheet? What are the different sections?

Answer preview

In classified balance sheet, the liabilities category has two sections, including the current liabilities and long-term liabilities. The current liabilities include obligations meant for liquation in one-year’s time or the entity’s operating cycle. Payment of current liabilities is mostly done using current assets. Long-term liabilities are obligations that are not current, and may include certain deferred taxes, mortgage notes, bank loans, among other related obligations. Finally, equity category has two sections; capital stock and retained earnings. Capital stock includes amounts received from the entity’s investors for its stock while the retained earnings include the accumulate income without the dividends.

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