Understanding and definition of the assets, Liabilities, and equity
Asset, Liability, and equity is the words that often we come across on the subject of accounting. What is an asset, Liability, and equity? Here we will explain about the understanding and definition of the assets, Liabilities, and equity.
assets are resources controlled by the enterprise as a result of past events and from which future economic benefits expected to be obtained from the company. The company’s assets come from transactions or other events that occurred in the past.
Companies typically acquire assets through spending in the form of purchase or own production. However, the absence of expenditure concerned does not exclude a goods or services meet the definition of assets, such as goods or services that have been donated to the company can be considered as an asset.
The future economic benefits embodied in an asset are the potential of these assets to make a donation, either directly or indirectly, in the form of a current cash and cash equivalents to the company. The potential can be shaped something productive and is part of the operational activities of the company. In addition, there are some benefits of economic assets in the future, such assets can be:
- Used alone as well as together with the other assets in the production of goods and services sold by the company
- interchangeable with other assets
- Used to settle a liability
- distribution to the owners of the company
Types Of Assets
In General, assets are divided into four, namely current assets, long-term investments, fixed assets, and intangible fixed assets. Here are some explanations in a nutshell.
Current assets are assets are expected to be melted (I) not more than 1 year or 1 cycle accounting. Current assets consist of:
- cash, all the available assets in the company’s cash or cash equivalents deposited in the Bank that can be taken at any time.
- securities, ownership of shares or other corporate bonds also have temporary, which at any time can be sold again.
- Trade Receivables, receivables from the company to another party (the debtor) that due to the sale of goods or services in credit.
- accounts receivable Wesel is a warrant on a person or a billing Agency to also be able to pay an amount of money on a specified date earlier, in whose names are already mentioned in the letter.
- accounts receivable income, income that has already become the rights, but has not yet received payment.
- Load Paid in advance, the burden of payments paid in the beginning, but has not yet become a liability in the period in question.
- Equipment, all equipment used for the sake of a smooth business and nature of consumables.
- Supplies Merchandise, goods purchased with the intention of resale with expects to get one profit.
A long-term investment is an investment in another company in a long period of time. In addition to obtaining profits or gains and control the company.
Fixed assets are a wealth owned company where its use (economically) more than a year, is used to process operations, and not for sale. Examples of fixed assets include land, buildings, machinery, equipment and transport tools, Office, etc.
Intangible Fixed Assets
Intangible fixed assets are a privilege belonging to the company and have a value but do not have a physical form. Are included in the intangible fixed assets include the following:
- goodwill, more value that belonged to the company due to certain privileges.
- Patents are the sole rights granted by a Government to a person or agency due to certain inventions as well.
- copyrights are the sole rights granted by a Government to a person or entity due to the presence of works of art or writing or intellectual works also.
- trademarks are granted by the Government to an entity to be able to use the name and also the sign for her business.
- the right of Lease is the right to be able to use the other party’s fixed assets in accordance with the length of time of the previous agreement.
- The franchise is a privilege that is earned by a person or an agency of another party to be able to commercialize formulas, techniques, or specific products.
It is understanding and the types of assets in accounting you should know. The assets of a business are important things that must be managed properly to get the benefits for a company, as well as encourage the achievement of business goals. Managing assets is not an easy thing to do.
the present company is the obligation arising from past events, a solution is expected to result in an outflow from the enterprise of resources containing economic benefits.
Liability arising from transactions or past events. So, for example, the purchase of the goods or use of the service raises the debt effort (unless paid in advance or at the time of submission and receipt of bank loans pose a liability to repay such loans.
The completion of the present obligations, in addition to the exemption from creditors, usually involves companies to sacrifice resources that have the benefits of the future to meet the demands of the other party. Settlement of obligations which now can be done in various ways, for example by:
- Cash Payment
- submission of other assets
- the granting of services
- replacement of such obligations with other obligations
- conversion of liabilities into equity
Simply put, equity is the size of a right or interest of the owner company on company property.
If we remember back the basic accounting equation, the left side is a treasure and the right side is the debt and equity.
The left side is the resources controlled by the company while the right side shows the magnitude of the interests of creditors and owners of company property.
The magnitude of the interests of the owner of the property company called equity.
The term comes from the word equity or equity of ownership which means the net worth of the company.
Simply put, the equity is formulated as total assets minus total liabilities may.
Equity is a part owner of the rights in the company that is the difference between assets and liabilities, and thus are not a measure of the value of selling the company.
Basically equity investment came from the owner and business results of the company. Equity would be reduced mainly by the presence of the recall of the inclusion by the owner, profit sharing or because of losses.
Bearing in mind that equity is the residual rights over company assets after deducting all liabilities in the balance sheet, thus the number of (the magnitude of) equity is equal to the difference between the assets and liabilities of the company.
The Equity Element
There are 5 elements of equity capital, i.e., profit sharing, assessment of capital return, capital donations, capital etc.
1 paid-in capital
This capital is the amount of money deposited by shareholders are generally divided into two groups, namely:
Share capital number nominal of shares outstanding.
Agio/Disagio is the difference between the deposit of Shares shareholders with a nominal amount of shares. Agio is the difference between the nominal top while the disagio is the difference below nominal. In the balance sheet, an agio will be added to the outstanding capital stock and disagio will is redeemable.
2 Unearned Profits
This capital represents a collection of previous years’ earnings that are not divided as dividends.
This profit comes from within the company. If the profit is a debit it will be called a deficit.
This type of profit capital is not subdivided at any time may be requested by the concerned (shareholder) as a dividend.
Therefore, the company should anticipate if the profit is not divided as a dividend by making the reserves of profit not shared.
3 Capital Assessment Back
When doing an assessment back against corporate assets-assets, then the difference between the value of old books (the books of the previous period) with the new book value is recorded as capital assessment again.
4 Capital Contributions
A capital donation was of capital incurred due to a company acquiring assets that originate from the donations.
5 other Capital
This capital for example such as capital on reserve is not divided as a reserve for expansion, backup, backup inventory price drop payment of bonds and so forth.
The amount of profit sharing which are already backed up cannot be asked back as dividends