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Assets
Current assets:
Assets that are or should
be converted to cash sometime this year.
On the balance sheet ALL should
be listed in order of liquidity.
- Cash: - includes checking and
savings accounts.
- Marketable Securities: - government
bonds, other stocks owned.
- Accounts Receivable: - money
people owe you when they pay later for what
they purchased.
- Inventory: - anything that will
be resold as is or is part of something that
is to be resold.
- Prepaid expenses that you could
get refunded if you stopped the service. Prepaids
might include insurance premiums paid in advance.
Fixed Assets
These are long term assets
that are not expected to be sold in order to create
cash. These assets help you earn more cash, such
as your property, plant and equipment. If they
don't ...sell them off for cash!
Property, Plant, and Equipment:-includes
everything that you and your employees use every
day to create the value for your customer such
as machines, buildings, computers, desks, etc.
Liabilities
Current liabilities
These are liabilities that
will consume your cash sometime this year. On
the balance sheet liabilities should be listed
in order of priority of claim - In other words
who is expected to be paid first.
- Accounts payable (trade
payables that you owe to someone else
- Notes Payable: - a promissory
note that you must pay soon that you owe to
someone; or this year's mortgage payments --part
of a much larger long term liability.
- Payroll taxes due: -self
explanatory ---do not let this one go unpaid!
- Accrued wages due: - what
you owe your employees -- not paying this one
can really put you in a bind
Long term liabilities
These are liabilities that
are not expected to be consume cash in this year.
These liabilities are closely related to the long
term assets in that you try to match the life
of the liability with the life of the asset.
Mortgages and long term loans for Property, Plant,
and Equipment are examples of long term liabilities.
Owners Equity*
Owner's equity is the difference
between the total amount of assets and the total
amount of liabilities. Owner's Equity is also
also termed your business' net worth. In some
cases there are different classifications of "owners
equity" such as preferred stock, warrants,
and different grades of common stock.
* Owners equity has been overly simplified for
this discussion.
Get
Interactive Balance Sheet
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