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Classified balance sheet
The following accounts appear in an adjusted trial balance of San Jose Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability; (d) long-term liability; or (e) owner’s equity section of the December 31, 2015, balance sheet of San Jose Consulting.
1. Building
2. Nata Foust, Capital
3. Notes Payable (due in five years)
4. Prepaid Rent
5. Salaries Payable
6. Supplies
7. Taxes Payable
8. Unearned Service Fees
Classified balance sheet
Classified Balance Sheet: In order to improve the ease of understanding, a classified balance sheet is used. Classified balance sheet categorizes each item of assets, liabilities, and stockholders ‘equity into a specific category.
A classified balance sheet is prepared under the following heading:
| Assets | Liabilities |
| Current assets: | Current liabilities: |
| Cash | Accounts payable |
| Marketable securities | Interest payable |
| Accounts receivable | Unearned revenues |
| Inventories | Notes payable |
| Prepaid expenses | Current maturities of long-term debt |
| Office supplies | Total current liabilities |
| Total current assets | |
| Investments: | Long-term liabilities: |
| Marketable securities | Bonds payable |
| Land held for investment | Notes payable |
| Total investments | Mortgage payable |
| Total long-term liabilities | |
| Property, plant and equipment: | |
| Land | Owners’ equity: |
| Building | Capital |
| Equipment | Total Liabilities and Shareholders’ Equity |
| Less: Accumulated depreciation | |
| Net property, plant and equipment | |
| Intangibles: | |
| Copyrights | |
| Total Assets |
Table (1)
To Indicate: The category in which the account would appear on a classified balance sheet.
Building – Property, plant, and equipment
Property, plant, and equipment, known as operating assets and it is used in the operational activities of the business. As the land is used for the operational activities of the business. Therefore, it comes under the category of property, plant, and equipment.
NF Capital –Owners’ equity section
Capital is a component of owners’ equity, as it is invested/contributed by the shareholders or stockholders for the future use of the company. Therefore, it comes under the category of owners’ equity.
Notes Payable (due in five years) – Long-term liabilities
Long-term liabilities are the obligations of the business that need not be paid within one year or within one operating cycle whichever is longer. As notes payable is due for five years. Therefore, it comes under the category of long-term liabilities.
Prepaid rent – Current assets
Current assets refer to the assets of a business, which are kept in reserve for converting them into cash, in a short time period, or within twelve months.
As the prepaid rent would be paid in advance, for which the benefit is to be received in the immediate future. Therefore, it comes under the category of current assets.
Salaries Payable – Current liabilities
Current liabilities refer to the liabilities of a business, which are supposed to be paid within a year or a period of twelve months...
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