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