ASSETS, LIABILITIES AND THE BALANCE SHEET BUSINESS VOCABULARY IN USE

 

BUSINESS VOCABULARY IN USE 30. ASSETS, LIABILITIES AND THE BALANCE SHEET

 

A Assets An asset is something that has value, or the power to earn money. These include: • current assets: money in bank, investments that can easily be turned into money, money that customers owe, stocks of goods that are going to be sold. • fixed assets: equipment, machinery, buildings and land. • intangible assets: things which you cannot see. For example, goodwill: a company’s good reputation with existing customers, and brands: established brands have the power to earn money. B Depreciation Joanna Cassidy is head of IT (Information Technology) in a publishing company: ‘Assets such as machinery and equipment lose value over time because they wear out, or are no longer up-to-date. This is called depreciation or amortization. For example, when we buy new computers, we depreciate them or amortize them over a very short period, usually three years, and a charge for this is shown in the financial records; the value of the equipment is written down each year and written off completely at the end. C Liabilities Liabilities are a company’s debts to suppliers, lenders, the tax authorities, etc. Debts that have to be paid within a year are current liabilities, and those payable in more than a year are long-term liabilities, for example bank loans. D Balance sheet EXERCISES 30.1 Look at A opposite. What kind of asset is each of the following? Which three are not assets? 1. Vans which a delivery company owns and uses to deliver goods. 2. Vans for sale in a showroom. 3. A showroom owned by a company that sells vans. 4. A showroom rented by a company that sells cars. 30.2 Use the correct forms of words in brackets from B opposite to complete these sentences. 1. The bank had lent too much and was left with a mountain of bad debts: £4.3 billion was ___________ (write off/ wrote off/ written off) last year. 2. Most highway building programs in the US are ___________ (amortization/ amortize/ amortized) over 30 years or more. 30.3 Look at C and D opposite and say if these statements are true or false. 1. Money that a company has to pay to s supplier in less than a year is a long-term liability. 2. A loan that a company has to repay to a bank over five years is a long-term liability. A company’s financial year can run from 1 May to 30 April.

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