Classified Balance Sheet

Learning Outcomes

  • Identify proper financial statement presentation of plant assets

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:

A calculator and a balance sheet.
  • 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.

in millions, except per share data February 2, 2020 February 3, 2019
Category, Assets
Subcategory, Current Assets:
     Cash and cash equivalents $     2,133 $     1,778
     Receivables, net 2,106 1,936
     Merchandise inventories 14,531 13,925
     Other current assets 1,040 890
       Total current assets Single line
19,810Double line
Single line
18,529Double line
Net property and equipment 22,770 22,375
Operating lease right-of-use assets 5,595
Goodwill 2,254 2,252
Other Assets 807 847
          Total assets Single line
$     51,236
Double line
Single line
$     44,003
Double line
Category, Liabilities and Stockholders’ Equity
Subcategory, Current liabilities:
     Short term debt $     974 $     1,339
     Accounts payable 7,787 7,755
     Accured salaries and related expenses 1,494 1,506
     Sales taxes payable 605 656
     Deferred revenue 2,116 1,782
     Income taxes payable 55 11
     Current installments of long-term debt 1,839 1,056
     Current operating lease liabilities 828
     Other accrued expenses 2,677 2,611
       Total current liabilities Single line
Single line
Long-term debt, excluding current installments Single line28,670 Single line26,807
Long-term operating lease liabilities 5,066
Deferred income taxes 706 491
Other long-term liabilities 1,535 1,867
          Total liabilities Single line
Single line
Single line Single line
Common stock, par value $0.05; authorized 10,000 shares; issued: 1,786 shares at February 2, 2020 and 1,782 shares at February 3, 2019; Outstanding: 1,077 shares at February 2, 2020 and 1,105 shares at February 3, 2019 89 89
Paid-in capital 11,001 10,578
Retained earnings 51,729 46,423
Accumulated other comprehensive loss (739) (772)
Treasury stock, at cost, 709 shares at February 2, 2020 and 677 shares at February 3,2019 (65,196) (58,196)
          Total stockholders’ (deficit) equity Single line
Single line
          Total liabilities and stockholders’ equity Single line
$     51,236
Double line
Single line
$     44,003
Double line
Note See accompanying notes to consolidated financial statements

Now, try out what you learned:

practice questions