Assets

Assets represent what a company owns. Assets are usually broken down into three categories:

  • Current assets: These are assets that can be easily converted into the most liquid and readily tradable asset of all- cash - within 12 months.

  •  Capital assets: These are assets that provide the company with operating capability. They are more permanent in nature than are current assets and will have value for many years. Some common examples are machinery, computer equipment, furniture and fixtures, and land and buildings.

  • Other assets: These are assets that cannot be defined as either current or capital. There are very few assets that belong in this category, the most notable of which are incorporation costs and goodwill.

Let's look at each of the main assets you may have on your balance sheet. Assets are usually listed on the balance sheet in liquidity order, which means you start the list with those assets that you can most readily convert into cash.

 

Petty Cash

Petty cash is the amount of money you have on hand. Most companies have a box containing small amounts of cash for small purchases like stamps, cream for coffee, and courier charges. The amount of money physically in the box should equal the balance of the petty cash account on the balance sheet.

 

Cash in Bank

This line on your balance sheet represents the amount of money you have in the company's bank account. At the end of every month, you will reconcile this account from the bank statements. Because there may be items that have been posted that have not yet cleared the bank, the balance may not exactly equal what's on your bank statement. The reconciliation process will help you determine if your balance is correct.


 
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