A balance sheet shows a company’s financial standing at a point in time. A small business organizes its balance sheet in one of two ways: unclassified or classified. An unclassified balance sheet shows accounts under three main section headings. The classified balance sheet -- the more common choice -- uses these same sections, but includes subsections, or classifications, within them to make it easier to identify accounts.

Three Major Sections

In both balance sheet formats, the three major sections are assets, liabilities and shareholders’ equity. Assets are a company’s resources, such as cash, inventory and equipment. Liabilities represent money a company owes other parties, such as accounts payable or loans. Shareholders’ equity is the owners’ stake in a company and consists of money from stockholders and reinvested profits. On all balance sheets, assets must equal liabilities plus shareholders’ equity. For example, if your small business has $100,000 in assets and $40,000 in liabilities, your equity is $60,000.

Classified Current Assets

The “current assets” subsection is the first of five asset classifications on a classified balance sheet. Current assets are those that will be used or converted into cash within a year. Those that will be used the soonest are listed first. The typical order is cash, short-term investments, accounts receivable, inventory and prepaid expenses. For example, if you have $50,000 in cash, $10,000 in accounts receivable and $30,000 in inventory, you would list them as current assets in that order.

Classified Non-Current Assets

The four remaining asset classifications contain assets that a business expects to hold for more than a year. The long-term investments subsection includes stocks, bonds and other securities. The “property, plant and equipment” classification contains buildings, machinery and similar assets. Items classified as intangible assets lack physical presence, such as patents. Lastly, “other assets” contains items not classified in the other subsections, such as deferred taxes.

Classified Liabilities

The two liabilities classifications are current liabilities and non-current liabilities. Current liabilities are those due within a year, such as accounts payable and wages payable. Non-current liabilities are debts due after a year, such as mortgages. For instance, if your small business has $10,000 in accounts payable and a $15,000 five-year loan, you would report $10,000 as a current liability and the $15,000 loan as a non-current liability.

Shareholders’ Equity

A business generally organizes the shareholders’ equity section the same way in both types of balance sheets. It first lists the money received from preferred stock owners and common stock investors. Sometimes it includes these under a “capital stock” classification on classified balance sheets. The next account, retained earnings, represents the profits a company has reinvested in its business since it began. If a business has repurchased stock from owners, it lists it as “treasury stock,” below retained earnings.

Unclassified Balance Sheet

An unclassified balance sheet is typically used by a small business with few different accounts. Each major section contains a single list of accounts in the same order as a classified balance sheet but without the subsections. For instance, the assets section shows cash first, followed by the remaining assets. The liabilities section typically lists accounts payable then the other liabilities.