Question

Which of the following financial statements places each asset and each liability into a specific category?

1) Classified balance sheet
2) Statement of cash flows
3) Income statement
4) Statement of owner's equity

Answer 1

A Classified Balance Sheet categorizes assets and liabilities into specific categories, providing a clear and detailed representation of a business's financial position. Thus, the option 1 is the correct answer.

Step-by-step explanation:

The financial statement that places each asset and each liability into a specific category is the Classified Balance Sheet. On a classified balance sheet, assets are usually categorized as current assets, long-term investments, property, plant, and equipment, and intangibles. Liabilities are classified as either current liabilities or long-term liabilities. This type of balance sheet provides a detailed framework that helps in understanding the financial position of a business at a glance. A bank's balance sheet, for instance, will categorize assets that the bank holds such as cash, reserves, loans, and bonds, while liabilities may include customer deposits and debts.