Balance Sheet Sample Detailed And Summary Balance Sheets Finpack
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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.
On the other hand long-term assets which can include land inventory and equipment are paid off and will benefit the company over an extended period of time. Accumulative depreciation is used on balance sheets to explain how the cost of long-term assets are "used up" during the process of running a business. The cost is spread over the life of the asset. For example say a piece of machinery cost $50 000 and the useful life of the machine is 20 years therefore in the first year the accumulative depreciation for the equipment is $2 500. Liabilities can simply be explained as the amounts owed to other organizations such as the transfer of assets or services that need to be provided. Liabilities are also made up of current and long-term.
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This includes amounts owed on loans accounts payable wages taxes and other debts. Similar to assets liabilities are categorized based on their due date or the timeframe within which you expect to pay them. Current liabilities are expected to be paid within a year; long-term liabilities in more than a year. Current liabilities are generally due within a year of the balance sheet date and are listed at the top of the right-hand column and then totaled followed by a list of long-term liabilities those obligations that will not become due for more than a year. Owners equity (sometimes called net assets or net worth or capital) represents the assets that remain after deducting what you owe. In simplified terms it is the money you would have left over if you sold your business and all of its assets and paid off everything you owe. Depending upon the structure of your business owners equity may be your own (sole proprietorship) collective ownership rights (partnership) or stockholder ownership plus the earnings retained by the company to grow the business (corporation). Total liabilities and owners equity are totaled at the bottom of the right side of the balance sheet.