Basic Financial Statements
The Balance Sheet
The Balance Sheet – Valuing Balance Sheet Items
Items on the assets side of the balance sheet are generally valued at cost. There are two exceptions—marketable securities and inventories. The rule that applies to marketable securities and inventories is lower of cost or market. That means that current market value or original cost, whichever is lower, is the appropriate value for marketable securities and inventories. For instance, if a share of stock was originally purchased for $80 three years ago and its value has fallen to $60, the value that would appear on the balance sheet is $60.
One note that should be made is in reference to accumulated depreciation. The accumulated depreciation account is what is called a contra-assetContra-asset:An asset item which would in essence carry a minus sign. account. That means that even though accumulated depreciation is reflected on the assets portion of the balance sheet, it in essence carries a minus sign. Therefore, if Gross Fixed Assets are $1,000,000 and Accumulated Depreciation is $200,000, Net Fixed Assets would be $800,000.
January 1, 2012
|Total Current Assets||$768,000|
|Total Long-Term Assets||$625,000|
|Claims on Assets|
|Total Current Liabilities||$250,000|