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This could be cash or real estate or stocks and bonds or machinery and equipment or accounts receivable or other moneys due to you. It could also include inventory which is product that you have produced but not yet sold. So to summarize assets are usually either cash something that you have bought something that you have made and that you expect to sell or something that is owed to you. Clearly then if you want to make your balance sheet you must have a list of your assets and how much each is worth. The rub lies in the worth or valuation of the assets. "Hmm you think I bought this asset ten years ago at 10 grand I added 5 grand in improvements to it it would cost me 20 grand to replace it and I could get about 18 grand on the open market for it so what value should I put down for it?" Clever question my dear reader! Well as you may have assumed we accountants have put a great deal of thought into these issues and we continue to think about and tweak the ways we value things to this very day.
In order to make your statements comply with these rules and to give them an air of authority you will have to hire a Certified Public Accountant or C.P.A. and have them compile review or audit your financial statements. What this means is that the C.P.A. takes your statements and then makes some cosmetic changes in order to present them in the form proscribed by US Generally Accepted Accounting Principles or if appropriate one of a number of alternate forms and then issues an opinion on them. The opinion will vary depending upon the type of engagement you hired them to do. The standard opinion for a compilation is "we took this pile of crap and made it pretty but we re not saying that it makes any sense" while the standard opinion for an audit is "sure we took a look and everything seems OK but please don t sue us if we re wrong!" while a review falls between the two.
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Before the disaster the only thing that had any importance was whether a potential buyer of anything could afford to make the payments on whatever he was buying assuming he made 120% of his stated income. The most outrageous symptom was that people would take appreciating home equity and borrow against it to buy depreciating assets and consumer goods. They overbooked their budgets and now they have gutted their balance sheet. The resulting loss of home values is the disaster we have now where people have either a zero or minus Net Worth. The other aspect is that we are now wiser. For the good of our society and our financial infrastructure we had better be. Going forward we must pay attention to our Balance Sheets and recognize that is where the gold is.