Assets and Liabilities Format
Using Vyapar, an all-in-one software, you can handle all your business requirements. No need to worry about making mistakes in managing assets and liabilities. It is the best billing, inventory, and accounting software.
What are Assets and Liabilities?
An asset represents any resource owned/controlled by the business. It holds an economic value and is
expected to give future benefits. Assets represent the value of ownership that you can convert into
cash. However, cash itself is also an asset.
Every company has debts, which appear on the balance sheet as liabilities. Liabilities are things you owe or have borrowed. Liabilities are settled by transferring economic benefits over time. It can be in the form of cash, goods, or services.
Types of Assets
An asset with a finite monetary value and physical form is known as a tangible asset. Tangible assets have two categories: Current Assets and Fixed Assets.
Current Assets are a company’s short-term assets and are also known as current accounts.
They are sold, consumed, used, or exhausted through business operations Within one year.
Current assets include cash, cash equivalent, debtors, stock, and other liquid assets. Current accounts are essential to fund regular business activities.
Fixed assets are long-lived, tangible property that a company cannot quickly convert into
cash. They are also Non-Current Assets because they take a long time to liquidate. The
company can use them to obtain credit and attract investors because they have long-term
Fixed assets are investments that show stakeholders that the company has growth potential. Further, they are of two types: Freehold and Leasehold Assets. Freehold assets are purchased with legal ownership and use rights. The owner uses leasehold assets without the legal right to do so for a set time.
An intangible asset is not present in a physical form. Some examples include goodwill, brand recognition, and intellectual rights of property. They can be created or acquired by businesses.
Types of Liabilities:
The company’s current liabilities are its short-term financial obligations. They must get settled in cash within the operating cycle of the company. Current liabilities have a life cycle of one year. Within that calendar year, the user can pay them with current assets.
Long-term liabilities are based on the long-term financial obligations of a business. They are due over a calendar year and do not require immediate clearance.
Contingent liabilities may or may not arise due to a particular event. Thus, contingent liabilities are potential liabilities.