Business Assets, Liabilities, and Financial Reporting
The Valuation
Heritage and the Concept of Mass Economic
Heritage is firm. Representation collects all resources and means. This account’s activity and funding have been in. Heritage is the set of assets, rights, and obligations pertaining to constitute a company and economic means through which it meets its objectives. Heritage concerns a company at a determined moment when the present time will be different.
Structure of Heritage
Heritage of a company, on one part, is the set of assets and rights. Investments the company has done and how those investments have materialized. This set of goods and rights is the economic structure. This represents what the company must have in assets to develop its business and get some profit.
Heritage consists of obligations that are shown as financial structure and is funded by the company. The company should reward funds provided by the financial structure. For this, it has made the process of processing elements of the economic structure so obtained profitability that compensated those who have made their money.
The economic structure is called assets and the financial structure, liabilities. Assets and liabilities are equal. Assets represent the amount of income and rights, and liabilities as such amount has been funded. Every element has been paid. Assets and liabilities are different goods that make up the heritage represented in quantitative terms.
The elements of heritage vary from one company to another but give homogeneity to the representation of the heritage of all companies. There is the general plan that contains the accounting principles, the standard valuation of assets and liabilities. Accounting is the fundamental instrument for this. Accounting is based on the change log given in various accounts. An account is the representation of each element of countable assets. Some elements of capital assets are represented by treasury bills, machinery, etc. Between assets and liabilities are liabilities of accounts, reserves as capital assets available.
A homogeneous property is a grouping of elements. Available assets are active elements that represent assets and rights. Liability and mass payment obligations are derived from the acquisition of assets.
Company Balance
The balance must collect the assets and rights that constitute the company. It turns on the equity, obligations, and liabilities. It is the accounting instrument of heritage representation. The two major mass-balance stand on the active company.
The asset is composed of income and rights of heritage. From the asset, it is expected to get some return. Items are listed in order of growth as a function of time to be transformed into money. Those that are at least one year later are grouped in assets and are called fixed assets. We can divide the asset and current asset.
Assets introduce elements formed by those lasting in the company not intended for sale:
- Tangible fixed assets (both tangible that serve as the company)
- Intangible elements allow the development of the enterprise
- The compound financial asset investments that the company makes to investment assets
Current assets allow the company the realization of its current. Available elements promptly suppose money resources for the company. Realizable packing specifications recovery due to current elements. Active stocks need to spend cash for sale and is a process of setting up the finished products of the company before its sale by necessary resources for its elaboration.
Company Liabilities
These are the payment obligations contracted to tackle the acquisition of assets. It implies financial costs for the company, formed by the owners, provided the company has accumulated when it has not been profitable and has distributed. We distinguish:
- Liabilities or net worth unenforceable: Equity of the firm as captain, reserves, etc.
- Liabilities to medium and long term: Payment obligation that the company has contracted with a maturity to medium and long term, normally exceeding one year, loans, creditors, etc.
- Current or enforceable liability: Payment obligations of a company with maturity, typically less than one year, suppliers, letters to pay, etc.
The Results and Their Representation
In the profit and loss account, there is a positive or negative difference between sales revenue of goods and services of the company and the expenses needed for their production. The profit and loss account is the accounting document that reflects the true picture of the company results during a determined period. The profit and loss account represents the results from blocks of accounts.
On one side are income accounts that reflect all company profits in a period, fundamentally from the sale of their products and services. Moreover, spending accounts collected all costs during the exercise that make the firm had to develop the activity, including resources and acquisition of elements of the asset.
If the difference classifies gains and losses, and expenses are positive, the company returned a benefit. If negative, the company incurred losses.
The Results of the Company
The profit and loss account classified revenues and expenditures by their nature. The company takes into account the different types of calculation results, a process that has several phases or steps:
Holding of result: Estimated by considering the revenue and expenditure activity that are the fundamental and typical of the company. Revenue is calculated from the amount of product sold by the sale price. For expenditure, it takes into account the requirements in the production process as raw materials and components, energy and supplies, personnel, depreciation by the party that depreciates or fixed assets, and other general expenses.
Bottom line: Financial results are calculated by the difference between financial income and financial expenses.
Special Guest: Includes all expenditure items of income that are outside the regular sports activities, normal activity, and typical of the company, that originate outside the process of primary production.
Result of the exercise: Overall result of all ordinary and extraordinary sports activities for the company during a period of time, the sum of regular results and extraordinary results to which taxes are subtracted.
The Memory and the Record Books
The Annual Accounts
Entrepreneurs and administrators must present the annual accounts, signed and properly identified. The annual accounts are integrated by balance, profit and loss account, and memory. There are standard formats for the company, for partners and shareholders, banks and other creditors, government, and public administrations.
Memory
Memory is one of the annual documents and discusses the information expanded, the balance of the profit and loss account. The most characteristic contents of memory are:
- Activity of the enterprise: Collect a brief history and the social order of the company, as well as sports activities or the business to which it is doing.
- Sharing the findings: Collects information on the proposal distribution of the benefits.
- Appraisal standards include information on accounting measurement criteria used in the different accounts.
- Fixed asset: Information on beginning and ending balance, as well as inputs and outputs of fixed assets.
- Social capital: Information on the operations that make it up.
- Debts: Information on long-term debt securities required or older.
- Group and associated companies: Information relating to other companies possessing the capital.
- Further information: On remuneration and credits from the counsel of administration. Any other information necessary for understanding the annual accounts.
Valuation of Heritage
Heritage of a company is owned, will consist of all goods and rights. If the company has obligations to others in determining the value of obligations, resulting in what is called net. The reasons for the widespread agreement on the setting value of the heritage of a company are very varied, “the company is not only a set amount of elements but also the intention of the company. In the company are not goods of a physical entity, but nevertheless are of value, for example, the customer, the template of personnel or organizational form. These are called intangibles.”
Accounting and tax laws provide a set of rules for valuing the elements of the company, but this value, although the goal is unrealistic. The determination of the heritage value of a firm can be performed in several ways depending on the method or approach used. There are two large approaches to determining the heritage value of a company:
- Add the value of the elements considered in isolation.
- Consider the company as a value other than a set of the sum of their parts.
Substantial Value or Heritage
It is the value to consider the value of the estate of the company as the sum of the values of all tangible items. You can use the historical value, the replacement value, and the liquidation value:
Historical value: It is to give each element the value of the cost at the time of joining the company.
Replacement value: It is to give each element the value of what it would cost to acquire at present.
Liquidation value: It consists in giving each element the value that would be obtained if sold in the second-hand market.
A particular case in the substantial value criterion is the book value, which states or records and better reflects the company’s tangible heritage: the balance sheet.