Defining Re Classification
In accounting, the word reclassification is often used to describe moving an amount from one general ledger account to another. For example, if an expense was charged to marketing supplies instead of administrative supplies, the correcting entry might read: To reclassify from marketing supplies to administrative supplies.
Reclassification can also refer to other situations. For example, when a company's long-term note payable becomes due in less than one year, the note will be reclassified to the current liabilities section of the balance sheet. If a company stops using one of its buildings and puts the building up for sale, the building will be reclassified from Property, Plant and Equipment to the Investments section of the balance sheet.
What effect will reclassifying a long term investment into cash within one year have on the current ratio?