Assets are subdivided into current and long-term assets to reflect the ease of liquidating each asset. Cash, for obvious reasons, is considered the most liquid of all assets. Long-term assets, such as real estate or machinery, are less likely to sell overnight or have the capability of being quickly converted into a current asset such as cash.
(a) Current assets
Current assets are any assets that can be easily converted into cash within one calendar year. Examples of current assets would be checking or money market accounts, accounts receivable, and notes receivable that are due within one year’ time.
Money available immediately, such as in checking accounts, is the most liquid of all short-term assets.
This is money owed to the business for purchases made by customers, suppliers, and other vendors.
Notes receivables that are due within one year are current assets. Notes that cannot be collected on within one year should be considered long-term assets.
(b) Non-current assets—these are assets which normally assist in generating revenue for the business. The benefits from these assets usually extend over several accounting periods. Non-current assets fall into three main categories:
• Fixed These are normally non-current assets of a physical nature.
Land is considered a fixed asset but, unlike other fixed assets, is not depreciated, because land is considered an asset that never wears out.
Buildings are categorized as fixed assets and are depreciated over time.
This includes office equipment such as copiers, fax machines, printers, and computers used in your business.
This figure represents machines and equipment used in your plant to produce your product. Examples of machinery might include lathes, conveyor belts, or a printing press.
This would include any vehicles used in your business.
Total fixed assets
This is the total dollar value of all fixed assets in your business, less any accumulated depreciation.
• Intangible These are normally non-current assets of a non-physical nature, for example, a franchise (a right to trade in a certain area) or goodwill (in simple terms, the value placed on the good trading name of a business).
• Investments This section includes such items as investments in shares, long-term loans made to persons and organizations, long-term deposits in banks and other financial institutions.
This figure represents the total dollar value of both the short-term and long-term assets of your business.