The balance sheet we learned to prepare in Lesson 1 was an unclassified balance sheet, even though we didn’t call it unclassified. In this lesson, we will learn how to prepare a classified balance sheet. In a classified balance sheet, rather than simply listing our assets and liabilities, we further break down assets and liabilities into categories.
Assets will be broken down into the following categories:
long-term investments: These are assets that the company intends to hold for longer than one year that do not fit into any other category. Examples include tangible property not used in the normal operation of the business and investments in another company’s stock if you intend to hold the stock for more than one year.
Liabilities will be broken down into the following categories:
The stockholders’ equity (owner’s equity) will still include only the following accounts:
We will discuss stockholders’ equity in further detail in a future lesson.