Asset Accounts

Asset accounts are i of the three major classifications of residue canvas accounts:

  • Assets
  • Liabilities
  • Stockholders’ equity (or owner’s equity)

The ending balances in the balance sheet accounts volition exist carried forward to the next bookkeeping yr. Hence the rest sheet accounts are chosen
permanent accounts
or
real accounts.

The asset accounts are usually listed commencement in the company’s chart of accounts and in the general ledger. In the general ledger the asset accounts will unremarkably have debit balances.

The balances in some of the asset accounts will be combined and presented as a single amount when the rest sheet is prepared. For case, if a company has 10 checking accounts, the balances will exist combined and the total amount will be reported on the balance sheet as the asset Cash.

Assets include the things or resources that a company owns, that were acquired in a transaction, and have a future value that tin can exist measured. Assets also include some costs that are prepaid or deferred and volition become expenses as the costs are used up over time.

Here are some examples of asset accounts:

  • Cash
  • Brusque-term Investments
  • Accounts Receivable
  • Allowance for Doubtful Accounts (a contra-asset business relationship)
  • Accrued Revenues/Receivables
  • Prepaid Expenses
  • Inventory
  • Supplies
  • Long-term Investments
  • Land
  • Buildings
  • Equipment
  • Vehicles
  • Piece of furniture and Fixtures
  • Accumulated Depreciation (a contra-asset account)

Descriptions of asset accounts

The following are cursory descriptions of some common nugget accounts.

Greenbacks

Greenbacks includes currency, coins, checking account balances, petty cash funds, and customers’ checks that take not still been deposited. A company is probable to have a separate general ledger account for each checking account, fiddling cash fund, etc. but volition combine the amounts and will report the full as Cash (or Cash and Cash Equivalents) on the balance canvas.

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Short-term Investments

Curt-term or temporary investments may include certificates of deposit, bonds, notes, etc. that will mature in less than one yr. It may as well include investments in the common or preferred stock of another corporation if the stock tin be hands sold on a stock exchange.

Accounts Receivable

Accounts receivable is a right to receive an amount as the result of delivering goods or services on credit. Nether the accrual method of accounting, Accounts Receivable is debited at the time of a credit auction. Subsequently, when the client pays the corporeality owed, the company volition credit Accounts Receivable (and will debit Cash).

Allowance for Doubtful Accounts

The Allowance for Doubtful Accounts is a contra-asset business relationship since its residuum is intended to be a credit rest (or a zilch balance). When the rest in this account is combined with the balance in Accounts Receivable, the resulting amount is known every bit the net realizable value of the receivables. The Allowance for Doubtful Accounts is used under the allowance method of reporting bad debts expense.

Accrued Revenues/Receivables

Under the accrual method of bookkeeping, revenues are to exist reported when goods or services have been delivered even if a sales invoice has not been generated. This business relationship volition report the amounts that a company has a right to receive but the sales invoices have even so to exist prepared or entered in Accounts Receivable.

Prepaid Expenses

These are time to come expenses that have already been paid. The amounts appear as assets until the costs have been used up or expire. A mutual instance of a prepaid expense is the payment for vehicle insurance. To illustrate this, assume that on December 29, a new company pays $6,000 for the insurance covering its vehicles for the six-calendar month period that volition begin on January 1. As of December 31, the entire $vi,000 will be a
prepaid
expense considering none of the toll has expired. Since none of the cost expired in December, at that place is no insurance expense in December. The insurance
expense
volition begin in January at a rate of $1,000 per calendar month. This is depicted in the following nautical chart:

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*The expense is the corporeality that is expiring during the calendar month.
**The prepaid amounts are the unexpired amounts and should exist the balance in the
asset
account Prepaid Expenses or Prepaid Insurance at the end of each of the months.

Inventory

Inventory is the
cost
of goods that accept been purchased or manufactured and have non yet been sold.

Supplies

Supplies could be part supplies, manufacturing supplies, packaging supplies or other supplies that are on hand. The cost of the supplies that remain on hand is reported every bit an nugget.

Long-term Investments

This account or asset category will be reported on the residue canvas immediately following current assets. Information technology may include investments in the common stock, preferred stock, and bonds of another corporation. It besides includes real estate being held for auction and also the money that is restricted for a long-term purpose such as a building project or the repurchase of bonds payable. The cash surrender value of a life insurance policy owned by a visitor is also reported nether this asset heading.

Country

This account represents the
holding
portion of the balance sail heading “Belongings, plant and equipment.” It reports the
price
of land used in a business concern. Since land is assumed to last indefinitely, the price of land is not depreciated.

Buildings

This business relationship will study the
cost
of the edifice used in the business organisation. The cost of buildings will exist depreciated over their useful lives.

Equipment

This business relationship reports the
toll
of the machinery and equipment used in the business organization. The cost of equipment volition be depreciated over the equipment’s useful life.

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Vehicles

This account reports the
cost
of trucks, trailers, and automobiles used in the business. The toll of vehicles is to be depreciated over the vehicles’ useful lives.

Furniture and Fixtures

This account reports the
cost
of desks, chairs, shelving, etc. that are used in the business. The cost of furniture and fixtures is to be depreciated over the useful lives.

Accumulated Depreciation

Accumulated Depreciation is known as a contra nugget account because it has a credit remainder instead of a debit balance that is typical for asset accounts. Whenever Depreciation Expense is debited for the periodic depreciation of the buildings, equipment, vehicles, etc. the account Accumulated Depreciation is credited. The credit balance in Accumulated Depreciation will continue to grow until an asset is sold or scrapped. However, the maximum amount of the credit rest is the toll of the nugget(s).