Assets are simply economic resources, tangible or intangible, which can be traded. There are a variety of asset accounts which compile to form a balance sheet. Cash asset accounts include currencies, coins, checking account balances, petty cash funds, and checks not yet deposited. Many companies have separate general ledger accounts for each checking account. On the balance sheet, these totals will be combined and reported as cash.
Short-term investments include bonds, certificates of deposits, and notes which will mature in less than a year. Also included are investments in another company’s common/preferred stock if the stock is easy to sell.
Accounts receivable is a legal claim to receive a payment for delivering material goods or services on credit. This amount is debited during a credit sale. When the amount is paid, accounts receivable is credited and cash is debited.
Allowance for doubtful accounts is known as a contra-asset account, which has a balance of a credit or zero balance. It is a balance sheet account used to balance the reported value of accounts receivable. The net realizable value of receivables is created when the balances in the allowance for doubtful accounts is matched with the balances in accounts receivable. Allowance for doubtful accounts provides a check on accounts receivable, giving a more realistic depiction of how often products or services sold on credit will not be paid for.
Accrued revenues and receivables are reported upon the delivery of products or services, even before being billed or paid for.
Prepaid expenses are assets which will arrive in the future, but have already been paid for. Until costs expire, these amounts appear as assets.
Supplies refer to items necessary to the day-to-day running of a business. This may include office supplies, manufacturing resources, or packaging. Current and available supply costs should be reported as assets.
Inventory refers to products which a company has held on to for future sale.
Long-term investments are assets which a company will hold onto for more than a year. This may include stocks and bonds in other companies, real estate, and cash intended for use at a later date. Life insurance policies also fall under long-term investments.
An equipment account details the costs of equipment owned and used by a business. Because equipment deteriorates over time, the cost of equipment depreciates over time.
A building account details the costs of properties owned and used by a business. Because buildings deteriorate over time, the cost of buildings depreciates over time.
A furniture and fixtures account details the costs of office furniture such as chairs, desks, shelves, tables, and more which are owned and used by a business. Because furniture and fixtures deteriorate over time, the cost of furniture and fixtures depreciates over time.
A vehicle account details the costs of tractor trailers, auto-mobiles, and trucks owned and used by a business. Because of vehicle wear over time, the cost of vehicles depreciates over time.
A land account refers to property owned by a business and the cost of land used by that business. Land does not depreciate in value, as it is not a resource which can be used up.
Unique for an asset account, accumulated depreciation has a credit balance as opposed to a debit balance. An account’s accumulated depreciation is credited when depreciation expenses are debited. This occurs when buildings, equipment, or vehicles depreciate in value. Until assets are sold off or scrapped, accumulated depreciation credit balances will grow. Note that a credit balance cannot exceed the cost of an asset.