Question

In: Accounting

As we have discussed, the classified balance sheet groups classes of assets, liabilities and equity. The...

As we have discussed, the classified balance sheet groups classes of assets, liabilities and equity. The most common classifications used within a classified balance sheet are:

Current assets

Long-term investments

Fixed assets (or Property, Plant, and Equipment)

Intangible assets

Other assets

Current liabilities

Long-term liabilities

Shareholders' or Stockholder's equity

The sum of these classifications equals what? And, are all classified balance sheets categorized the same?

Solutions

Expert Solution

It should be noted that In a Balance Sheet,

Assets – Liabilities = Capital

Hence for the question,

Fixed/Current Assets+ Long-term investments+ Intangible/Other Assets -- Current /Long-term Liabilities = Shareholders' equity

As per format of Balance Sheet, Assets may be shown on one side & Liabilities and Capital may be on other side (Liabilities + capital= Assets)

If we add up all those items mentioned as Assets + Liabilities + Capital, we will reach on 2 * Total Assets, which is equal to double of One side total in a Balance Sheet since Liabilities + Capital is equal to Assets.

Yes, All Balance sheet follows the same categorization since definition of assets, liabilities and capital doesn’t change conceptually and Accounting Equation Assets- Liabilities = Capital doesn’t change too.

While Inside a category there may be changes, since asset may be a current/ fixed or investment may be short term/ long term. Liability may be long term and short term too


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