Will result in a future cost to the corporation.Are a present obligation of the corporation.Liabilities are generally defined as items that: Long-term liabilities include ongoing commitments such as loans, mortgages, debentures, finance leases and other long-term financing arrangements. Examples of current liabilities include accounts payable, demand loans and current portions of long-term liabilities.Ĭurrent liabilities are often compared to current assets as a measure of liquidity. Different types of liabilitiesĬurrent liabilities are those that are expected to be settled within one year, or one operating cycle―whichever is longer. Liabilities are amounts that the company owes and will have to settle in the future. The notes to the financial statements can be very helpful in understanding the values that have been given to an asset and why it might differ from your expected valuation. As a result, items are often required to be expensed if certain criteria cannot be met that prove there will likely be a future benefit to the corporation. Additionally, accounting is traditionally conservative. GAAP requires assets to be valued using a specific method (which may be cost or fair market value). This is particularly true for intangible assets and assets that are developed internally. However, a company’s analysis and GAAP may differ over the values. This definition is fairly intuitive and usually agrees with a company’s internal analysis of their assets. Will result in a future benefit to the corporation.Assets are generally defined as items that: Generally Accepted Accounting Principles (GAAP) often requires that assets be recorded based on certain criteria. Intangible assets are expected to produce value simply through the rights and privileges conferred by owning them. Many long-term assets are amortized as they are used.Īssets can also be intangible, such as trade secrets, industry know-how, patents or copyrights. Examples of long-term assets include buildings, machinery and equipment (also known as fixed or capital assets). Long-term assets are those that you use in the operation of your company and that will continue to offer benefit beyond a single year or operating cycle. Examples of current assets include cash, accounts receivable and inventory (e.g., raw materials, work in progress, finished goods). Different types of assetsĬurrent assets are those assets that you expect to either convert to cash or use within one year, or one operating cycle―whichever is longer. This benefit may be achieved through enhanced purchasing power (i.e., decreased expenses), revenue generation or cash receipts. Balance sheet: AssetsĪn asset is an item that the company owns, with the expectation that it will yield future financial benefit. These three sections of the balance sheet are explained below. When you read a set of financial statements, you’ll see that the balance sheet has three sections: Related articles contain details on the income statement and the cash flow statement (and more). A set of financial statements is comprised of several key statements.
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