Current Assets, Fixed Assets & Intangible Assets

The Assets in Balance Accounts represent the resources of the company claims made against assets, liabilities and equity made by the owners or stockholders. The assets accounts relate to the properties of the company that used in the business operations to generate income.

Assets have two classification current assets and long-term assets.

Current Assets use in the business operation during the period of 12 months and these are the most liquid assets. The following accounts includes in current assets:

Cash and Cash Equivalent

1. Cash in Bank

The company primary bank account is checking account used for business operations includes revenue deposits and payments of expenses.

2. Cash on Hand

The cash on hand account is the total amount of any existing cash. It refers to any available cash whether it is in the pocket or in the bank account. The investments that can convert in cash in 90 days or less are normally included in cash on hand.

3. Petty Cash Fund

Petty cash fund is the money that you keep on hand to make acceptable small payments.

Accounts Receivable

This account represents the receivables from customers who buy the product or render the company services and subject to issue invoices as billing to a customer on credit. The accounts receivable has agreed certain time, it is normally one month or any other agreed contract.

Inventory

The inventories are the value of the products on hand intends to sell to customers. It is generally used in the current business operation thus; it is included in the current assets.

Prepaid Expenses

This account represents the advance payment for expenses to be used in one year or current operating business cycle. For example, rent, insurance and other advance payments. It is subject to have accounting entry in order to record and to amortize each month based on the issued postdated cheque.

Long-term assets represent the anticipated assets that will use over 12 months or more than one year. These are the fixed assets help the business operation to generate income and to maintain company stability. Some of the most common long-term assets include the following:

Land

Land is purchased or donated and it is usually capitalized but not depreciated.  Land can be recorded at, and remain at, historical cost. The cost related in the realization of a structure can be capitalized and it is included in the cost of land. When land and a building are acquired as a package, most organizations separate values for each. 

Land Improvements

These accounts involve those that are permanent and add a significant value to the land, such as site improvements include fencing, excavation and infrastructure include driveways, parking lots and roads.

Buildings

Buildings are normally valued at the time of acquisition or construction. Professional fees include broker fees, architect fees, permits, and other related cost can be covered within this category. 

Building Improvements

Any cost of improvements that extend the useful life of a building includes roofing, remodeling, replacements and other related cost will include under the account of “Building Improvements”.

Furniture and Fixtures

Tables, chairs, cabinets, and any other stuff that use in the business operation are included in the furniture and fixtures account. The value to record of these accounts based on the cost of purchasing these items. These items are depreciated during their useful lifespan.

Equipment

This account pertains to computers, routers, servers, copiers, cash register, tools and other office equipment that use in the business operations are included in the equipment account. This equipment is intended to be used for more than one year. Equipment accumulates the depreciation based on their useful life and subject for replacement as soon as it is fully depreciated.

Vehicles

This account refers to cars, trucks, or other vehicles owned by the company and use to generate income in the business. The initial value of any vehicle is listed in this account based on the total cost paid to put the vehicle in service. Vehicles also depreciate through their useful lifespan.

Accumulated Depreciation

The following accounts refer to the fixed assets accumulate the depreciation expenses based on their useful life.

• Accumulated Depreciation - Building
• Accumulated Depreciation - Building Improvements / Leasehold Improvements
• Accumulated Depreciation - Furniture & Fixtures
• Accumulated Depreciation - Equipment
• Accumulated Depreciation - Vehicle

Intangible Assets that are non-monetary assets those are without substance and identifiable or other legal rights. Intangible assets pertain to relevant recognition criteria measured at cost, subsequent measured at cost or use the revaluation model and amortized on a systematic basis over their useful lives except these accounts have an unspecified useful life that is not subject to amortized. The following accounts included in long term assets.

Goodwill

This account refers to intangible value of purchase for things related to company reputation, strong brand name, good customer relations, good employee relations, store locations, and customer base. Goodwill pertains also when a company is purchased by another company; the amount paid for the company over the book value usually accounts for the target firm's intangible assets.

Copyrights

This account refers to the costs incurred to establish copyrights. This legal right terminates after a set number of years, so its value is subject to be amortized as the copyright used it up.

Organization Costs

These accounts involve initial start-up expenses to get the business off the ground. Special licenses and legal fees must be written off over a number of years using a method similar to depreciation called amortization.

Amortization - Organization Costs

This account relates the accumulated amortization of organization costs during the period in which they’re being written-off.

Patents

The patent account includes the costs associated with patents, grants made by governments that guarantee to the inventor of a product or service the exclusive right to make, use, and sell that product or service over a certain period. Patent costs should be amortized.

Amortization – Patents

This account refers to the accumulated amortization of a business’s patents.

Asset category is the first part of balance sheet and other part will be discussed in the next article. See you in the next part of this module.