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

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.

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.