Balance Sheet -
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.
