2.1 The Classified Balance Sheet

A classified balance sheet helps determine:

- whether the company has enough assets to pay its debts as they become due - the claims of short and long term creditors on total assets

Long-term investments are

1. generally investments in stocks and bonds of other companies that are normally held for more than one year 2. long-term assets such as land or buildings that a company is not currently using in its operating activities 3. long-term notes receivable

Classified Balance Sheet

A balance sheet that groups together similar assets and similar liabilities

A classified balance sheet generally has these standard classifications:

Assets - current assets - long term investments - property, plant, and equipment - intangible assets Liabilities and Stockholder's Equity - current liabilities - long term liabilities - stockholder's equity

current assets

assets a company expects to convert tp cash or use up within one year or its operating cycle

intangible assets

assets that do not have physical substance

Property, Plant, and Equipment

assets with relatively long useful lives that are currently used in operating the business ex. land, buildings, equipment, delivery vehicles, and furniture

stockholder's equity contains:

common stock and retained earnings

accounts receivable

current asset

prepaid insurance is a:

current asset

service revenue

does not appear on the balance sheet

a significant intangible asset

goodwill

retained earnings

income retained for use in the business

goodwill

intangible asset

common stock

investments of assets into the business by the stockholders

companies list current assets in order of ________

liquidity

debt investments (long term)

long term investments

long-term liabilities ( long term debt)

obligations that a company expects to pay after one year ex. long term notes payable, bonds payable, mortgages payable, and lease liabilities

Current Liabilities

obligations that the company is to pay within the next year or operating cycle ex. accounts payable, wages payable, interest payable, and current maturities of long-term bank debt

accumulated depreciation

property, plant, and equipment

land

property, plant, and equipment

Depreciation

the allocation of the cost of an asset to a number of years

operating cycle

the average time that is required to go from cash to cash in producing revenues

Liquidity

the ease with which an asset can be converted into cash

Accumulated Depreciation

the total amount of depreciation that the company has expensed thus far in the asset's life