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In the span of time that you have been running your business, have you ever asked yourself what you consider as its assets and liabilities? When it becomes a challenge to balance the sheets, it means that something is wrong. When defining the assets and liabilities of the business becomes challenging to identify, then you must seek the help of a professional accountant. Not only can they help you find balance in the sheets, but they can also help you identify what you should consider as assets and liabilities when you list them down in the books.
What do Assets Mean?
Assets are items that have become a property of the business. They can be both tangible and intangible. The tangible ones include all the items that can be seen as part of the business operations including the office tables, chairs, printers, machinery and the like. On the other hand, intangible items are those that you cannot see or touch but you know is part of the business like patents, investments, and even good customer relations. Assets are called such because they can be used to help the business gain more today and in the future.
What do Business Liabilities Mean?
Liabilities of the business include all the items that you use to make the product or provide the service that is yet to be fully paid. Whether it is a loan you took out from the bank or the salary of your employees that you are loaning for, they are considered business liabilities for they are not yet paid. Their cost will then be added to the company expenses, making you lose profit within a specified period or until the loan made has been fully paid.
How do You put Current Assets and Liabilities on Record?
Do you have assets that can be converted to cash within the fiscal year? These are the assets that will fall under current assets. These assets could include all forms of cash or cash equivalents, inventory, account receivables as well as other company liquid assets that can easily be converted to cash. Current assets play an important role in keeping the company afloat. They help ensure that the payables and dues are paid on time. Such assets help maintain the day-to-day operation of the smooth business sailing.
Current liabilities, on the other hand, are the bills that need to be paid every month, does that require a monthly or quarterly payment as well as short-term debts that need to be settled within the fiscal year. Every business must have working capital. Accountants suggest that companies have this fund to keep the day-to-day operation going without the need to incur debt.
The challenge to every business owner is to keep their assets higher and their liabilities to a minimum. Working closely with an accountant you trust will help your business achieve a positive working capital, allowing your business to be as efficient as you want it to be.