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A
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Assets
A company’s balance sheet gives a ‘snapshot picture’ of its assets
and liabilities at the end of a particular period, usually the 12-months
period of its financial year. But the snapshot could be taken on any day of
the year.
An asset is something that has value or the power to earn money for a
business. Assets include:
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1
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current assets
• cash at the bank.
• securities: investments in
other companies.
• stocks, of raw materials,
unfinished goods and finished goods, that are going to be sold.
• debtors: money owed to the
company by customers.
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2
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Fixed or tangible assets:
equipment, machinery, buildings, land.
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3
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intangible assets: for
example, goodwill, the value that the company thinks it has a functioning
organization with its existing customers, and in some cases brands,
because established brands have the power to earn it money, and would
have a value for any potential buyer of the company.
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However, there are some things of value that are never shown on a
balance sheet, for example the knowledge and skills of the company’s
employees.
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B
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Depreciation
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Of course, some assets such
as machinery and equipment lose their value over time because they wear
out and become obsolete and out of date. Amounts relating to this are
shown as depreciation or amortization in the accounts. For example, some
computer equipment is depreciated or amortized over a very short period,
perhaps as short as three years, and a charge for this is shown in the
accounts. The value of the equipment is written down or reduced each year
over the period and written down or reduced each year over that period
and written off completely at the end.
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EXERCISES
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35.1
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Complete the assets table for a UK company with expressions from A
opposite, and the relevant figures, using the following information:
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•
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Paradigm has goodwill, in
the form of hundreds of satisfied customers, worth an estimated £15,000. This
is its only intangible asset.
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•
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It has investments of £6,000
in other companies.
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•
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It has raw materials,
unfinished goods and finished goods together worth £3,500.
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35.2
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Using
the information in B opposite and in the table above, decide if these
statements about Paradigm’s assets are true or false.
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1. The figure for equipment
and machinery is the price it was bought for, written down by an amount
for depreciation.
2. The figure for equipment
and machinery shows that it has been written off completely.
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