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The standard classifications used in preparing a Classified Balance Sheet fall into three main categories. These are Assets, Liabilities, and Stockholders' Equity. However, there are subdivisions of these three main classifications.
Assets are further subdivided into Current Assets (such as Cash, Supplies, Prepaid Insurance); Investments; Property, Plant & Equipment; Intangible Assets (such as Goodwill); and Other Assets. These comprise Total Assets.
Liabilities are further subdivided into Current Liabilities (such as Accounts Payable, Interest Payable); and Long-Term Liabilities. These comprise Total Liabilities.
The Stockholders' Equity classification is broken down into Common Stock, Retained Earnings, and Treasury Stock. These comprise Total Stockholders' Equity.
The above classifications allow for the clear, concise, orderly presentation of financial information to interested stakeholders. They represent a picture, so-to-speak, of an entity's financial position at a particular point in time - for example at a calendar year-end.
The Classified Balance Sheet is a detailed snapshot of The Accounting Equation: Assets = Liabilities + Owners' Equity (Stockholders' Equity or Shareholders' Equity).
The Classified Balance Sheet is helpful to business analysts, investors, bankers, regulatory authorities, and others interested in the financial health of a business organization. In addition, it is useful for internal analysis by a company's management as they strive to make decisions that will make the company more efficient and profitable.
The Classified Balance Sheet is part of a family of major financial statements that includes the Cash Flow Statement, the Income Statement, and the Statement of Stockholders' Equity.
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