On a classified balance sheet, liabilities are reported on the:

• A. right side, below equity
• B. right side, below assets
• C. left side, above assets
• D. right side, above equity

Answer: (D)

Verified step by step guidance

1. Understand the structure of a classified balance sheet: A classified balance sheet organizes assets, liabilities, and equity into specific categories for clarity and better financial analysis.
2. Recall the standard layout of a balance sheet: Assets are listed on the left side, while liabilities and equity are listed on the right side.
3. Focus on the placement of liabilities: Liabilities are reported above equity on the right side of the balance sheet. This reflects the priority of claims, as liabilities represent obligations that must be settled before equity holders receive any residual interest.
4. Review the reasoning: Liabilities are positioned above equity because they represent debts owed to external parties, which take precedence over the claims of equity holders in the event of liquidation.
5. Confirm the correct answer: Based on the structure of a classified balance sheet, liabilities are reported on the right side, above equity.