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Date: 2015-10-07; view: 404.
Balance sheet 1
A Assets
A company's balance sheet gives a 'snapshot picture' of its assets and liabilities it the end of a particular period, usually the 12-monts period of its financial year, but the snapshot could be taken on any day of the year.
An asset is something that has value or the power to earn money for a business. Assets include:
1 current assets:
- cash at the bank.
- securities: investments in other companies.
- stocks, of raw materials, unfinished goods and finished goods, that are going to be sold.
- debtors: money owed to the company by customers.
2 fixed or tangible assets: equipment, machinery, buildings, land.
3 intangible assets: for example, goodwill, the value that the company thinks it has as a functioning organization with its existing customers, and in some cases brands , because established brands have the power to earn it manes, and would have a value for any potential buyer of the company.
However, there are some things of value that are never shown on a balance sheet, for example the knowledge and skills of the company's employees.
BrE: stocks, AmE: inventories;
BrEdebtors AmE accounts receivable / receivables
Of course, some assets such as machinery and equipment lose their value over time because they wear out and become obsolete and out of date. Amounts relating to this are shown as depreciation or amortization in the accounts. For example, some computer equipment is depreciated or amortized over a very short period, perhaps as short as three years, and a charge for this is shown in the accounts. The value of the equipment is written down or reduced each year over that period and written off completely at the end.
The amount that is shown as the value of an asset at particular time is its book value.
This may or may not be its market value, i.e. the amount that it could be sold for at that time. For example, land or buildings may be worth more than shown in the accounts because they have increased in value. Equipment may be worth less than shown in the accounts because its value has not been depreciated by a realistic amount.
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| Calculating Profitability Ratios | | | Note: the terms' depreciate' and 'depreciation' are usually used in the UK; 'amortize' and 'amortization' are more common in the USA. |