The balance sheet we learned at the beginning of the course in both the report form (assets are first and liabilities and equity are below) and the account form (side-by-side was fairly simple and straightforward. Balance sheets produced by publicly traded companies contain a lot of information and are almost always in the report form. Like the multi-step income statement, they follow a certain format that includes subtotals. The classified balance sheet groupings and subtotals make the balance sheet easier for investors to read and analyze. The classified balance sheet still proves the accounting equation but it separates assets and liabilities into the following subgroups:

• Current Assets: Can be converted to cash within a year or within the operating cycle, whichever is longer. Current assets include cash, accounts receivable, interest receivable, supplies, inventory, and other prepaid expenses.
• Long-Term Investments: Investments that are not due for more than a year are reported in this section. Long-term investments would include notes receivable or investments in bonds or stocks.
• Plant Assets: Plant assets (also called PP&E or fixed assets) refer to property that is tangible (can be seen and touched) and is used in the business to generate revenue. Plant assets include depreciable assets and land used in the business. The plant asset is recorded with its accumulated depreciation (if any) subtracted below it to get the asset’s book value.
• Intangible Assets: Intangible assets are items that have a financial value but do not have a physical form. These would be things like trademarks, patents, and copyrights.
• Current Liabilities: Like current assets, these are liabilities whose payment are due within a year or within the operating cycle, whichever is longer. Current liabilities include accounts payable, salaries payable, taxes payable, unearned revenue, etc.
• Long-Term Liabilities: Liabilities due more than a year from now would be reported here, including notes payable, mortgage payable, bonds payable, etc.

As an example, here is the classified balance sheet for Home Depot, Inc. Look through it and identify the various subgroups we just discussed for the assets and liabilities on a classified balance sheet.

See the balance sheet long description here.

Now, try out what you learned: