What Is an Unclassified Balance Sheet?

An unclassified balance sheet defined

The balance sheet is one of the primary financial statements that an accountant needs to prepare. Balance sheets can be classified or unclassified. Most balance sheets are prepared in a classified format. The different parts of a balance sheet are defined below.

Assets

According to the Payroll Source, current assets are the first type of asset listed on the balance sheet. Current assets are those that can be converted into cash within one year of issuance of the balance sheet. The current assets are listed in order of liquidity. Liquidity is defined as how long it would take to convert the asset into cash. Plant, property, and equipment assets are those that are to be held in excess of a year. The last major type of assets is deferred assets. These are assets that are intangible and include such things as the values of patents and goodwill.

Liabilities

The Payroll Source defines liabilities as amounts that are owed to other parties for services or goods rendered. Current liabilities are those that must be paid within a year of the balance sheet date. Current liabilities would be items such as withheld taxes, garnishments, accrued vacation that must be taken, and anything else that, whether by necessity or the law, must be disbursed within a year. A long-term liability is one that will transcend from the current year to at least one future year. Examples of long-term liabilities include benefit accruals that will be used in the next fiscal year or health benefits for retired employees. It is quite common to have a particular item that is partially allocated to current liabilities and the rest allocated to long-term liabilities. As an example, Payroll Source says that health benefits or accruals for an employee that would partially be paid in the current year and the remainder paid in a future year would require such an allocation.

Shareholders' Equity

The Payroll Source describes shareholders' equity, or net worth, as the owners' share of the business after all liabilities have been covered. Examples of shareholders' equity would include common stock shares, retained earnings, and contributed capital. Contributed capital are cash infusions from owners or investors and they do not stem from revenues in any way. Retained earnings are those that were earned from revenues and were reinvested into the business.

Unclassified Balance Sheet

Unclassified and classified balance sheets have the same basic data. However, Accounting Coach enumerates that an unclassified balance sheet is one on which line items are not grouped by category, whereas a classified balance sheet is structured exactly that way.

References

• Accounting Coach - Balance Sheet
• "The Payroll Source"; Michael P. O'Toole; 2011