What is a Classified Balance Sheet?
A classified balance sheet may help to the readers to understand the table easier. Because this sheet has a very practical feature; the data in these sheets are classified and grouped. This is an easier method than the using a simple balance sheet. Because it is easy to read and you can understand the information better with the small groups. This sheet includes some main titles such as liabilities, assets, equipment etc. It is important to show the duration; for example current liabilities, long-term liabilities etc. This balance sheet type aims to make the data clearly for the users. Grouping and classifying are the one of the most practical ways for this purpose. You can see the effectiveness of this sheet easily.
How to prepare a Classified Sheet?
First, we can say that there is no definite rule for the classifications which will be placed in your classified balance sheet. People can make whatever classifications they want. Generally the” long term and current” titles are preferred. You can review the some steps as example for these sheets:
- Type an asset title. There may be some groups for this part; current, fixed and other asset. Write the details for each of them.
- Type a liabilities title. There may be some groups such as; current and long-term liabilities. Don’t forget to input the data of the total; total assets, total liabilities, total fixed assets etc.
- Type equity of owner title. Give the details in small groups under the title.
You can create a useful tool for a financial situation classification. The format can be changed but generally people use some common assets and liabilities titles; for example generally “Assets” title has some sub-titles such as current assets, long-term investments, plant, equipment and property, other assets. “Liabilities” title generally has sub-titles as current and non-current liabilities. The needs may be different for the industries so these sheets can be arranged in accordance with the sectors, companies etc.
The Importance of a Classified Balance Sheet
This sheet can be understood easier than the balance sheet because balance sheet shows data very briefly. There is no group or classification in balance sheets. So, it is a general view of a financial situation but a balance sheet with classifications is more useful to see the details and so understand the big picture better. You can add or remove titles as you want and customize your sheet according to your requirements. Financial situations are more understandable and clear in this way; you can take measures more quickly and follow your financial situation when it is necessary.
You can find some prepared templates for the balance sheets. A template is a blanked format and you can input your own information easily. Many websites provide various templates free of charge. With this template, you can create your sheet in a short time. Choose the best classified balance sheet template for your need, download and edit it as you desire!