sheet.
Assets category on the balance sheet
Current assets are assets which will be sold, collected, or consumed within one year or the
firm’s operating cycle, whichever is longer. The operating cycle is the average time between
paying for inventory or the employees who perform services and receiving cash payment
back from the firm’s customers.
1.
Cash is currency or demand deposits.
2.
Short-term investments are debt or equity investments for which a ready market
exists and management intends to sell within one year or operating cycle.
3.
Accounts receivable are amounts owed to the firm by its customers for goods and
services delivered.
4.
Notes receivable are amounts owed, usually by customers, which will not be collected
within the typical collection period.
5.
Inventory represents products that will be sold in the normal course of business.
6.
Prepaid expenses (e.g., rent) are services paid for but not yet used.
Investments are land, debt securities, or equity securities which management does not
intend to sell within the year.
1.
Property, plant, and equipment: Land is the real estate upon which the firm’s buildings
sit.
2.
Intangible assets are economic resources lacking tangible existence such as patents,
copyrights, trademarks, and goodwill.
Liability categories on the balance sheet
Liabilities are responsibilities (amounts owed) which must be met in the future, usually by the
payment of cash. Current liabilities are those liabilities that will be paid within one year or
operating cycle.
1.
Accounts payable are the amounts owed to suppliers for goods or services received
but not yet paid for.
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