Classification of Assets on Balance Sheet
Balance sheet is a statement of accounting that gives the financial position of the company at the end of a specific time period. The balance sheet also helps to know the financial position of the company at the given instance. Usually balance sheet is based on three criteria's. First one is the assets, then the liabilities finally the equity owned by stock holder or the owner of the company.
Assets are the resource acquired by the company that can be expressed in terms of cash. Mostly assets are considered to pay the debts in case of any financial crisis in a company. So, shareholders also look at assets with much importance while investing in stocks. In case of banks, they give more credit or allocate loans based on the assets acquired by a company.
Classification of Assets:
In a balance sheet the assets are classified as current assets, investments, property plant and equipment, intangible assets, and others.
Current assets are the one that is expected to convert to cash within the current operating time period of the company. These include cash, temporary investments, and accounts receivable, inventory, receivables etc.
Long term investments that are not going to be sold in near future are considered as an investment. These include investments in bonds, stocks, land that is not used by the company, pension funs, even some insurance are also considered as investments.
Property, plant and Equipment:
This type of assets are also known as Fixed assets. Fixed assets are purchased with aim of using it on a long term to increase the profit of a company. These include the fixtures, buildings, machines, land that is used by the company, tools, and automobiles. Depreciation is also calculated for these assets that are negated from the profit of the company.
Intangible assets are those whose value cannot be calculated physically. But, they are very important to the very existence of a business. These include copyrights, brand name, patents, trademarks etc.
The assets that cannot be classified in any of the above category can be added to the balance sheet under "other assets".