Balance Sheet Accounts Balance Sheet Accounts Examples Balance Sheet Accounts Are Listed In Order Of Decreasing Liquidity Balance Sheet Accounts Receivable
Most Popular This Week
Current liabilities are those that will be paid within one year these include accounts payable notes payable current maturities of long-term debt and payroll taxes. Long-term debt is that which is paid off over an extended period of time. Owner s equity also called net assets is the right of ownership the owners of the organization have after subtracting liabilities. Some examples of owner s equity include common stock additional paid in capital and retained earnings. Common stock is issued as an investment in the business. For example in corporations stockholders are ultimately the owners they claim all assets after liabilities and preferred stock claims are satisfied. Additional paid in capital is defined as the leftover amount paid by the investor over the stated value of the shares sold. Finally the retained earnings are the net income that is not be distributed as dividends to owners or an organization.
Non-current assets therefore contains all resources owned by the company that have a useful life of more than one year. These assets are often referred to as Capital Assets which include equipment buildings and land. Notice that all assets mentioned thus far whether current or non-current can be classified as Tangible Assets which contain physical substance. However the balance sheet also presents Intangible Assets which are reported as non-current capital assets as well since they have a useful life of more than one year but do not have any physical substance such as goodwill and patents. The sum of the current and non-current assets will equate to and be reported on the balance sheet as Total Assets of the company. Liabilities: represents the claims against the company s assets that have not been paid at the balance sheet date. Therefore they are obligations to the company s creditors.
Most Popular This Week
For most of these kinds of items a company will book their value at whatever was paid for it. While items that depreciate like computers are usually de-valued over a period of time that piece of land will likely appreciate over time and the current value may not be reflected on the balance sheet. This can make the company more valuable than it appears (some value investors refer to these as "asset plays"). For financial companies a ton of assumptions are made on the balance sheet. The actual value of a loan is very difficult to calculate due to variable interest rates risk of default risk of early payment etc. Take that reality and multiply it by the millions of loans a large bank has outstanding and you begin to see why investing in banks is such a difficult and risky endeavor. However since the Magic Formula throws out financial stocks we won t discuss that in much detail here. One other thing to be generally aware of is that both assets and liabilities are categorized as either "current" or "long-term".