Classified_Balance_Sheets

Classified Balance Sheets A balance sheet, also known as the statement of financial position for a company or business, is considered to be a major financial statement for business owners and accountants. A company’s balance sheet contains that company’s financial status at given points of time. It allows creditors and bankers to see if the company qualifies for further credit or loans. Investors (current and potential), suppliers, management, government agencies, labor unions and customers benefit from the information found on a balance sheet. A classified balance sheet is presented in distinct categories, groupings or classifications. The categories will appear in a specific order on the balance sheet. This order is: current assets, investments, property/plant/equipment, intangible assets and other assets. Current assets are assets that can be consumed or converted into cash within a time period of one year. The most liquid assets will be listed first, assets such as, cash, short-term investments and receivables. This information is of interest to creditors, bankers and investors. It is the first sign of success or failure of a business. The long-term investments would include funds set aside for expansions, land purchases, and funds that are redeemable from insurance and other outside investments. Property, plant and equipment would include a listing of all land, buildings and equipment owned by the business or company and used by said company or business. Intangible assets are assets that are not physically available at the time. There are two forms of intangible assets. One form would be legal intangibles, such as patents, copyrights and trademarks. The other would be competitive intangibles, which are know-how and knowledge. As long as the company can keep these categories in the positive, it should signal current and future success of the business. If any of these were to start becoming negative and showing debt not being paid, then the business would start to collapse.