Long-Lived Assets Held For Sale Are Classified As Fixed Assets Balance Sheet Explained

You are searching about Long-Lived Assets Held For Sale Are Classified As Fixed Assets, today we will share with you article about Long-Lived Assets Held For Sale Are Classified As Fixed Assets was compiled and edited by our team from many sources on the internet. Hope this article on the topic Long-Lived Assets Held For Sale Are Classified As Fixed Assets is useful to you.

Balance Sheet Explained

A balance sheet can be defined as “a statement prepared with a view to accurately measuring the financial position of a business at a certain date.

“It is prepared in the trial balance after all the nominal account balances are transferred to trade and profit and loss accounts and the corresponding accounts in the ledger are closed. The balances now left in the trial balance are either personal accounts or real accounts. In other words, they either represent assets or liabilities that exist on the date of closing of the accounts.

All these assets and liabilities appear in the balance sheet according to certain principles such as:

(a) All real and personal accounts with debit balances should be shown on the asset side of the balance sheet on the right.

(b) All real and personal accounts with credit balances should be shown on the liability side of the balance sheet, which is on the left. The excess of assets over liabilities represents owner’s equity. This capital figure must correspond to the closing balance of the capital account in the ledger after the net profit or loss has been transferred to it.

It shows that when real and personal accounts are placed on the opposite side of the balance sheet according to the nature of the balance, the asset side should be equal to the liability side.

As stated earlier and personal accounts with debit balances are called fine; actually in the merchant’s property and assets as well as the debts due to him (various debts and bills received) are assets.

Real and personal accounts with credit balances and owner’s capital are shown as liabilities. So liabilities are debts owed by a business to third parties and the business owner.

Classification of Assets

Assets are classified as follows:

(a) Fixed Assets. Assets of a durable nature that are used in business and are acquired and intended to be held forever for the purpose of carrying on the business, such as land, buildings, machinery and furniture etc. They are also called as capital or fixed assets. capital expenditure or fixed assets. The fixed assets are collectively known as ‘Blocks’.

(b) Floating assets or circulation. Assets held temporarily that are intended for resale or that are frequently subject to change such as cash, stock, stores, accounts receivable and accounts receivable. Floating assets are again divided into two parts, liquid assets and illiquid assets. Liquid assets are those that can be easily converted into cash without appreciable loss. Cash in hand and cash in bank are examples of these assets. Other assets that cannot be easily converted into cash, or that are not without appreciable loss, are called illiquid assets such as stock, stores.

(c) Fictitious Assets. Those assets that are not represented by anything concrete or tangible. Preliminary expenses, debit balance of profit and loss accounts are the examples of these assets. These are also known as ‘nominal’ or ‘imaginary’ assets.

Classification of Liability

The responsibilities of a concern can be classified as given below:

(a) Fixed liability. These bonds must be redeemed after a long period of time. This includes long term loans.

(b) Current Obligations. These bonds must be redeemed in the near future usually within one year. Trade creditors, bank loans, bills payable etc., are examples of current liabilities.

(c) Contingent Liability. These are not actual liabilities but the liabilities become actual depending on the happening of a certain event. In other words, they would become responsible in the future if the contemplated event occurs. If it does not happen, there is no responsibility. Since such a liability is not a current liability, it is not shown on the balance sheet. Usually, it is mentioned in the form of a footnote.

Balance sheet form

A balance sheet has two sides – the left side and the right side. These two sides, however, are not comparable to the debit side and credit side of a ledger account because the balance sheet is not an account. The words ‘To’ or ‘Not’ are not used in the balance sheet. The left side is the liability side and contains the credit balance of all real and personal accounts and the right side is the “asset” side. debit balance of real and personal accounts.

Arrangement of Assets and Liabilities in the Balance Sheet 0

The assets and liabilities should be arranged in the balance sheet in some specific order. The arrangement of assets and liabilities in the balance sheet is called ‘Marshalling of assets and liabilities’. There are two systems of arrangement of assets and liabilities in the balance sheet:

(a) Liquidity order.

(b) Standing Orders.

In order of liquidity more easily realized assets are shown first and are followed by assets that are less easily revenable. So the goods that are more difficult to realize will show last. In case of responsibilities, these will be shown in the order in which the most urgent responsibilities are paid first.

Distinction between Trial Balance and Balance Sheet

1. Trial balance is the ‘middle’ of the accounting process in which the balance sheet is the ‘end’ because a balance sheet is always prepared from the figures taken from the trial balance.

2. The purpose of preparing a trial balance is to check the arithmetical accuracy of the books of accounts; but the balance sheet is written to reveal the financial position of the business.

3. Two parts of the balance sheet are called ‘liabilities’ and ‘assets of value’ respectively but incase of -trial balance columns are ‘debit’ and ‘credit’ columns.

4. To complete the accounting cycle, the preparation of the balance sheet is. necessary; but the preparation of trial balance is not always necessary. –

5. The period after a balance sheet is prepared is normally one year, but trial balances are prepared very frequently and may be monthly, quarterly or half-yearly.

6. Trial balance includes all three types of accounts. personal real and nominal, but balance sheet has only personal and real accounts.~

7. Generally, trial balance does not have closing stock but balance sheet does.

8. It is not possible to know the receipts and expenses accrued, in advance, outstanding and prepaid in the trial balance, but the balance sheet discloses these items.

Factory Account

Some concerns like to ascertain the cost of the goods manufactured during the year clearly before preparing the trade account and ascertaining the gross profit. This account is called the manufacturing account and is prepared in addition to the trading account. It has the following features:

(i) Since the purpose of the preparation of this account is to ascertain the cost of the goods produced during the year, they do not enter into the action of opening and closing the finished goods; will be calculated in trade account.

(ii) In respect of material, the figure of material consumed is debited to the account. This figure is obtained by adjusting the purchase of materials for opening and closing stock of materials such as, Opening stock of raw materials Add: purchases of raw materials during the year Less: closing stock of raw materials Cost of materials consumed

(iii) In the manufacturing concern there will always be some unfinished goods or work in progress. The cost of work-in-progress at the end of the year is credited to this account, shown in the balance sheet and debited to the manufacturing account in the next year as on the opening balance.

(iv) All expenses in factory wages, electricity and gas, repairs and maintenance, factory wages, factory rent and prices are debited to this account. Depreciation on cars is also debited to this account and not to the profit and loss account as they usually do.

(v) The amount raised from the sale of waste or scrap materials is deducted from the purchase of raw materials.

(vi) Now the difference is two sides in this account will be the cost of goods manufactured during the year. This cost will be credited to manufacturing account and debited to trading account.

The trading account will now contain only the opening and closing stock of finished goods, the cost of manufactured goods as transferred from the manufacturing account and sales of finished goods. The gross profit will be transferred to the profit and loss account. The profit and loss account and the balance sheet will be prepared as already explained.

Video about Long-Lived Assets Held For Sale Are Classified As Fixed Assets

You can see more content about Long-Lived Assets Held For Sale Are Classified As Fixed Assets on our youtube channel: Click Here

Question about Long-Lived Assets Held For Sale Are Classified As Fixed Assets

If you have any questions about Long-Lived Assets Held For Sale Are Classified As Fixed Assets, please let us know, all your questions or suggestions will help us improve in the following articles!

The article Long-Lived Assets Held For Sale Are Classified As Fixed Assets was compiled by me and my team from many sources. If you find the article Long-Lived Assets Held For Sale Are Classified As Fixed Assets helpful to you, please support the team Like or Share!

Rate Articles Long-Lived Assets Held For Sale Are Classified As Fixed Assets

Rate: 4-5 stars
Ratings: 7795
Views: 87721688

Search keywords Long-Lived Assets Held For Sale Are Classified As Fixed Assets

Long-Lived Assets Held For Sale Are Classified As Fixed Assets
way Long-Lived Assets Held For Sale Are Classified As Fixed Assets
tutorial Long-Lived Assets Held For Sale Are Classified As Fixed Assets
Long-Lived Assets Held For Sale Are Classified As Fixed Assets free
#Balance #Sheet #Explained

Source: https://ezinearticles.com/?Balance-Sheet-Explained&id=615993

Related Posts

default-image-feature

Logo Not Coming In Color While Printing How To.Fix That Locating Hp LaserJet 1200 Printer Drivers

You are searching about Logo Not Coming In Color While Printing How To.Fix That, today we will share with you article about Logo Not Coming In Color…

default-image-feature

Liplants That Contain Essential Nitrogen-Fixing Bacteria In Their Root Systems Coffee Cultivation: Pests, Diseases and Chemical Disinfection

You are searching about Liplants That Contain Essential Nitrogen-Fixing Bacteria In Their Root Systems, today we will share with you article about Liplants That Contain Essential Nitrogen-Fixing…

default-image-feature

Lg Cell Phone W-Fi Say Not Allowed Need To Fix Latest Range of LG Fridge Freezers

You are searching about Lg Cell Phone W-Fi Say Not Allowed Need To Fix, today we will share with you article about Lg Cell Phone W-Fi Say…

default-image-feature

Key Considerations In Directing Remote End-Users To Fix Their Problems The 7 Pitfalls That Can Ruin Your Conference Calls

You are searching about Key Considerations In Directing Remote End-Users To Fix Their Problems, today we will share with you article about Key Considerations In Directing Remote…

default-image-feature

Jar My.Jar Does Not Show My Images How To Fix Infidelity 101 – Picking Up the Pieces After the Affair

You are searching about Jar My.Jar Does Not Show My Images How To Fix, today we will share with you article about Jar My.Jar Does Not Show…

default-image-feature

Item In A Multi-Quantity Fixed-Price Listing Has Been Sold Quickly Selling Real Estate by Owner When Fast Cash Is Necessary

You are searching about Item In A Multi-Quantity Fixed-Price Listing Has Been Sold, today we will share with you article about Item In A Multi-Quantity Fixed-Price Listing…