Introdution to Accounting

BALANCE SHEET(ASSET)

Balance Sheet or Statement of Financial position is a statement made by merchants and others to show the true state of a particular business. A balance should exhibit all the balances of debits and credits, also the value of merchandise, and the result of the whole.

Balance sheet is also a statement of asset, liabilities and capital of a business or other organization at a particular point in time, detailing the balance income and expenditure over the preceding period.

Asset, liabilities and capital are all real accounts. Thus, balance sheet contains real accounts. Before defining the meaning of asset, liabilities and capital, let me first define the meaning of real accounts.

Real account is a general ledger account that does not close at the end of the accounting year. In other words, the balance in the real accounts are carried over to become the beginning balances of the next accounting period. Generally, the real accounts are the balance sheet account.

Halimbawa, umutang si Kathryn kay Daniel ng P50.00. Ang tawag sa P50.00 sa point of view ni Kathryn ay utang or accounts payable (liability) at sa point of view naman ni Daniel, ito ay pautang or accounts receivable (asset). Kung at the end of the year, hindi pa nakabayad si Kathryn, ibig sabihin on the next year, may utang pa rin si Kathryn at may pautang pa rin si Daniel. To sum it up, hindi nag close ang account at the end of the accounting year. Kaya siya tinawag na REAL ACCOUNTS- it does not close at the end of accounting period.

Pero what if nagbayad na si Kathryn? Ibig sabihin ba nito hindi na siya real accounts? Still real accounts pa rin siya though nag close na ang account niya. Why? Nag close ang account niya dahil na-settle niya ito at hindi dahil nag close na ang accounting period.

Asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represents value of ownership that can be converted into cash.

There are two types of asset: current asset and noncurrent asset.

Current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle.

Noncurrent asset is company long-term investments where the full value will not be realized within the accounting year.

Mas madaling palatandaan, kung realizable siya within a year, current siya; and if not, noncurrent. Pero, kailangan ding tandaan na dapat tignan mo muna kung ano ang industry ng company. May epekto rin kasi ito sa pag-identify kung current or noncurrent ang isang asset.

Halimbawa, si Daniel ay nagpapautang or lets say na isa siyang CEO sa isang financial company. Then si Kathryn, isang owner ng manufacturing business; lets say gumagawa sila ng ketchup. Gustong mag-expand ng business si Kathryn kaya umutang siya sa isang financial company, kay Daniel sa halangang P500,000.00. Napagkasunduan ng dalawa na annually ang payment ni Kathryn over the period of five years. P100,000.00 per year plus interest.

Sa point of view ni Daniel, ‘yung pautang niya kay Kathryn ay current asset. Kahit na more than one year ang realization ng pautang niya, still current siya kasi ang pagpapautang ang talagang line of business niya. Ibig sabihin, within the normal operating accounting cycle pa rin siya. 

Pero what if bumili ng buiding si Daniel para sa expansion ng business niya? ‘Yung buiding ba is current or noncurrent? Since hindi naman line of business ni Daniel ang bumili ng building at more than one year ang cost ng building, ibig sabihin, noncurrent asset ito.