In financial accounting, what does a classified balance sheet show?

• A. Only total assets, total liabilities, and total equity without any subtotals or categories
• B. Revenues and expenses classified by function to determine net income for the period
• C. Assets, liabilities, and equity grouped into current and noncurrent (or long-term) categories to highlight liquidity and maturity
• D. Cash inflows and outflows from operating, investing, and financing activities for the period

Answer: (C)

Verified step by step guidance

1. Understand that a classified balance sheet is a financial statement that organizes assets, liabilities, and equity into specific categories to provide clearer information about a company's financial position.
2. Recognize that the main purpose of classification is to separate current and noncurrent (long-term) items, which helps users assess liquidity (how quickly assets can be converted to cash) and maturity (when liabilities are due).
3. Identify that current assets include items expected to be converted into cash or used up within one year, such as cash, accounts receivable, and inventory, while noncurrent assets include long-term investments, property, plant, and equipment.
4. Similarly, classify liabilities into current liabilities (due within one year) and long-term liabilities (due after one year), which helps in understanding the timing of obligations.
5. Note that equity is usually presented separately and represents the owners' residual interest in the company after liabilities are deducted from assets.