1. Fixed Assets
Items you own and intend to use for the duration of your firm rather than sell for a profit are considered fixed assets.
This includes structures, furnishings, cars, machinery, and plant. These could be regarded as depreciating assets (although this might not apply to buildings in a rising property market).
Other assets, or intangible assets as they are frequently referred to, include things like goodwill and the value of any licenses, copyrights, trademarks, or patents you may have.
2. Current Assets
The term “current assets” refers to funds that are readily available to you, such as cash in your till and credit in your bank, money owing to you by clients, stock, and any pre-paid expenses that you may theoretically recover, like the rent on your property.
(Here, “money due by your clients” refers to money you are certain you will be able to recover.) You must include a part on your balance sheet called “provision for bad debts” if you are unsure about payment.
3. Current Liabilities
Current liabilities are a company’s short-term financial obligations that are due within one year or within a normal operating cycle. Current liabilities are typically settled using current assets, which are assets that are used up within one year.
Examples of current liabilities include accounts payable, short-term debt, dividends, and notes payable as well as income taxes owed.
4. Long Term Liabilities
Long-term liabilities includes long-term loans such as mortgages or lease payments on vehicles. Companies are funded through a mixture of debt and equity. The debt of the company can be found in the Long Term (or Non Current) Liabilities; and the equity in the Shareholders’ Funds (sometimes called Capital & Reserves). The debt plus the equity represents the total capital employed in the business.
5. Accounts Payables
Accounts payable (AP) tracks money owed to creditors. Examples include bank loans, unpaid bills and invoices, debts to suppliers or vendors, and credit card or line of credit debts. Rarely, the term “trade payables” is used in place of “accounts payable.” Accounts payable belong to a larger class of accounting entries known as liabilities.
6. Accounts Receivables
Accounts receivable ( AR) tracks the money owed to a person or business by its debtors. It is the functional opposite of accounts payable.
Accounts receivable are sometimes called “trade receivables.” In most cases, accounts receivable derive from products or services supplied on credit or without an upfront payment. Accountants track accounts receivable money as assets.
7. Accruals
Revenues and expenses recognized by a company but not yet recorded in their accounts are known as accruals (ACCR). By definition, accruals occur before an exchange of money resolves the transaction.
For example, a company that hired an external consultant would recognize the cost of that consultation in an accrual. That cost would be recognized regardless of whether or not the consultant had invoiced the company for their services. Accounts payable and accounts receivable are accrual types.
Others include accrued costs (costs incurred but not resolved during a particular accounting period) and accrued expenses (expenses or liabilities incurred but not resolved during a particular accounting period).
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