Assets
Balance sheet displays the company’s total assets, and how these assets are financed. It is based on below equation:
Assets = Liabilities + Equity
Assets represent the resources owned by a company. They are used to generate future economic benefits in the form of either higher cash inflows or lower cash outflows. Anything tangible or intangible that can be owned or controlled to produce positive economic value is an Asset.
It can be organised into liquid assets and non liquid asset. Asset which are cash or can be easily converted into cash are called Liquid Asset. Asset which cannot quickly be converted to cash, such as land, buildings, and equipment are called Non Liquid Asset. Assets can also be classified into current and non-current assets. Current Asset (Short term asset) are those assets that are expected to be consumed within the next one year. Any asset that is expected to be consumed after one year is called Non Current Asset (Long term asset). Example of current assets are cash and cash equivalents, inventories, and receivables. Examples of non current assets are plant, property, and equipment (PP&E).
Types of Assets
List of asset that may be reported on a company’s balance sheet include:
- Cash and cash equivalents : It includes currency, coins, checks received but not yet deposited, checking accounts, savings accounts.
- Accounts Receivable: Includes asset a company’s clients owe it. A company will not always insist on cash payment as soon as the product or service is delivered. A client may be given a time frame to pay.
- Marketable securities: Include investments in various types of financial securities, like stocks, bonds, etc.
- Inventory: It include raw materials that the company has bought, finished goods.
- Land and Buildings: A long-term asset account that reports the cost of property and the cost of constructed assets on the property.
- Equipment: It is a non-current or long-term asset account which reports the cost of the equipment. It will be depreciated over its useful life by debiting the income statement account.
- Intangible Asset: It includes nonphysical assets such as patents, trademarks, copyrights and goodwill.