Assets

Are listed In a specific order. They are listed in an order in which a business can convert their assets into cash if needed. This order is called is called liquidity Assets:Cash Accounts Receivable Office Supplies Computer Supplies Equipment Land Building

Current Assets
Are assets are that can be converted into cash within one year. Current assets are still listed in order of liquidity. Types of Current Assets Cash Short term Investment Example: 1 year GIC Account Receivable Merchandise Investor Prepaid Expenses: Example: Prepaying Rent

Capital Assets
Use to be called long term assets They contribute to a business for more than a year. Trucks, Equipment, Buildings and Land would fall under this category. Capital Assets which have the longest life would be listed first.

Cost Principal
When assets are obtained they recorded at the actual cost to the business. Even if the owner feel the assets are worth more or the value has increased, the assets must be listed at the cost, at the time.

Liabilities
Are debts that a business has. The creditors who are owed their money have a claim against the assets of the business if they are not paid. The creditors have first right to any money owned before the business can benefit from a sale. Are listed according to their payment due date, from most recent to longest. This is known as the maturity date rule. Current Liabilities are to be paid within one year. o Account Payable o Notes Payable o Taxes Payable Account payable: o Items you purchased on credit for the business that need to be paid. These amounts are normally due within 30 days. Think of it as paying for something on your credit card. Bank lone: o Loans owing to the bank and vary in time , usually 1-5 years. Mortgage payable o Amount borrowed from financial institution to purchase buildings and land. o Since the amount is usually large it is not uncommon for these debts to take more than 25 year to pay back.

Owners Equity
Is the owners claim to the company. Also called net worth. Listed on balance sheet as: o J.S, Capital The owners equity section lists all the owners of the company.

Users of Balance Sheets

Owners Creditors Investors Government o Page 10

Basic Balance sheet

List Assets, liabilities and owners equity in a forma, but non detailed report. Page 5 example

Classified Balance Sheet

Is a more detailed balance sheet as items are placed into addition categories to provide more information to users. It answers questions such as: o Which debts must be paid first and within the next year? o Isa there enough cash or assets to pay for the debts o Which debates need to be paid for in near future year

Type of Balance Sheet Horizontal Balance Sheets o Assets listed on the left side and liabilities and owners equity is listed on the right side. o Page 5 example Vertical Balance Sheets o All three items are listed on the left side with assets being first, liabilities second and owners equity last. o Page 149 example