Understanding Business Assets and Financial Statements
Accounting Treatment of Information
Economic accounting studies business assets, standards, and scientific fundamentals. It is based on the records of the economic information of the company.
This is done statically, by observing heritage at one time, and dynamically, as variations occur over time.
Accounting provides information so the company’s management can make more informed decisions.
The company’s goal is to provide economic information to different levels and types of users within the company and its economic environment.
Business Assets: Concept
Business assets are the set of assets, rights, and obligations that a company duly examines in relation to its intended purpose.
Assets reflect the economic structure of the company, i.e., its total investment or the allocation of its funds. Equity and liabilities reflect the company’s financial structure, i.e., the origin of the financing (own resources plus debt with third parties).
The pools of assets represent homogeneous elements according to the basic criterion used for ordering. According to this criterion, the assets can be classified as non-current assets and current assets. Non-current assets consist of fixed assets, long-term financial investments, and real estate investments. Current assets are formed by assets in stocks, realizable assets, and available assets.
Assets and liabilities are property, rights, and obligations that, in turn, form the heritage of the company. Below, we will name the different elements of capital of the company grouped by categories.
The assets of fixed assets are classified as tangible assets, intangible assets, and accumulated depreciation of fixed assets. The assets and liabilities of the company are the elements of long-term financial investments, the assets of real estate investments, the assets in stocks, the assets of realizable current liabilities, the assets of the available unenforceable or those of equity, the assets of long-term liabilities and non-current liabilities, and the required economic elements of short-term or current liabilities.
Balance Sheet and Company Results
A balance sheet is a conveniently arranged statement where the assets at a given time are the joint property and assets available. This arrangement is not random, since it seeks to relate the sources of funding (liabilities) with investment (assets). It is a snapshot of the company’s estate at one time.
Accounting allows us to determine the results of the company for a period of activity, which usually coincides with the natural year. That is to say, we know whether the company has had losses or gains at the end of that period by calculating the difference between income and expenses.
Examples of expenses include merchandise purchases, purchases of raw materials, sales returns, leases, royalties, and transportation costs. Examples of income include sales of merchandise, services provided, refunds of purchases, and rental income.