ACC10

Completing the Accounting Cycle Discussion and Illustrations

C. Gomez Classified Balance Sheet

Balance Sheet Classifications

Usually…
1
Notes receivable are promissory notes usually issued by
customers when paying for goods or services. These are,
by default, short-term or current, unless there is a
portion of the principal amount which will be due more
than one year from the balance sheet date. In which
case, such portion shall be noncurrent.
2
Prepayments are advance payments for expenses.
These are, by default, short-term or current, unless a
portion of the balance will be consumed or used up in a
period beyond one year from the balance sheet date. In
which case, such portion shall be noncurrent.

3
Investments are instruments representing interest of
the company in other entities e.g. shares of stock, bonds,
etc. These are, by default, noncurrent, unless a particular
investment will mature (or will be sold and realized in
cash) within the next year, after balance sheet date. In
which case, such portion will be current.

4 Notes payable are promissory notes usually issued by

the company in payment to its suppliers. These are, by
default, short-term or current, unless there is a portion of
the principal amount which will be due more than one
year from the balance sheet date. In which case, such
portion shall be noncurrent.

5 Loan, mortgage, and bonds payable are, by default,

noncurrent liabilities, unless there is a portion of the
principal amount which will be due within a year from
the balance sheet date. In which case, such portion will
be current.

NOTE: For definition of important terms relating to this topic, please refer to the text book (Wild, Shaw, Chiappetta 19th
edition), pp. 145 – 147.

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 ACC10
Completing the Accounting Cycle Discussion and Illustrations
C. Gomez Classified Balance Sheet

Illustration
The adjusted trial balance of Fresh Prince Enterprises as of December 31, 2010 follows:

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 ACC10
Completing the Accounting Cycle Discussion and Illustrations
C. Gomez Classified Balance Sheet

Given the adjusted trial balance above, the Company was able to prepare its balance sheet, income statement, and
statement of changes in owner’s equity:

1
Included in total investments portfolio are investment in San Miguel bonds amounting to P50,000, which are due on March 31, 2011. All other
investments are not expected to be realized within the next year.
2
Prepaid insurance consists of an advance payment of fire insurance coverage. There are still 43 months left to be covered by the insurance policy as of
year-end.
3
Notes payable arose from a promissory note issued in 2009, which will be due five (5) years from issuance.
4
Fresh prince made additional cash investments during 2010 amounting to P375,000.

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 ACC10
Completing the Accounting Cycle Discussion and Illustrations
C. Gomez Classified Balance Sheet

Classified Balance Sheet

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