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Basic Financial Statements

 Self-Paced Overview

The Balance Sheet

Definitions of Balance Sheet Items – Assets

Balance sheets may be quite detailed depending on the nature and complexity of a business. Regardless of their complexity, however, the same basic notions of construction apply. Again it is helpful to keep in mind the "left–right" balance sheet orientation. An illustration of a somewhat complex balance sheet may help understand the different types of accounts. AssetsAssets:Rights or resources that have future benefit or service potential, which can be expressed in money terms and which result from a business transaction. will be covered first on this page, and then claims on assets will follow.

Balance Sheet
Products, Inc.

 
January 1, 2017

Scroll over account names for definitions

Assets

Current AssetsCurrent Assets:Liquid assets.
CashCash:Negotiable checks and checking account balances, cash on hand. Savings accounts are usually classified as cash. $50,000  
Marketable SecuritiesMarketable Securities:Ownership and debt instruments that can be readily converted to cash. $70,000  
Accounts ReceivableAccounts Receivable:Monies due on accounts from customers. $95,000  
Notes ReceivableNotes Receivable:Monies due from debtors. $50,000  
InventoriesInventories:Balances of goods on hand. Include raw materials, work in process, finished goods. $90,000  
Total Current Assets   $355,000
Long-Term AssetsLong-Term Assets:Generally, long-term assets take longer than a year to be converted to cash.
Tangible AssetsTangible Assets:Physical facilities used in the operations of the business.    
LandLand:Shown at acquisition cost and not depreciated. $89,000  
BuildingsBuildings:Structures valued at cost plus permanent improvements. $99,000  
MachineryMachinery:Equipment listed at historical cost. $35,000  
Accumulated DepreciationAccumulated Depreciation:Contra-asset account. Reduces gross fixed assets. −$5,000  
Net Tangible AssetsNet Tangible Assets:Gross tangible assets minus accumulated depreciation. $218,000  
Intangible AssetsIntangible Assets:Nonphysical assets such as legal rights or excess earning power caused by a business transaction.    
GoodwillGoodwill:Arises from the acquisition of a business for a sum greater than physical asset value. $20,000  
PatentsPatents:Exclusive legal rights granted to an investor for a period of 17 years. $19,000  
TrademarksTrademarks:Distinctive names or symbols. Granted for 28 years with option for renewal. $13,400  
Organizational CostsOrganizational Costs:Legal costs incurred when a business is organized. Carried as an asset and usually written off over a period of 5 years or longer. $22,900  
Total Intangible Assets $75,300  
Other AssetsOther Assets:Assets that do not fit into one of the other classifications.    
InvestmentsInvestments:Usually stocks and bonds; as well as monies set aside in special funds. $23,000  
Deferred ChargesDeferred Charges:Expenses which have been deferred until some future period. $53,000  
Total Other Assets $76,000  
Total Long-Term Assets   $369,300
Total Assets   $724,300

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