AAKASHAYA PATRA SEVEN STAR SMART EDUCATION SERIES PART – 48 : 21.06.2020
Balance Sheet of A Company
Most Important Part of
Company's Annual Report
This section of the Balance Sheet talks about the resources held by the company which will help it in generating revenues.These assets can be broadly divided into non-current assets or current assets.
Non-Current Assets also known as long-term assets
include resources which are not expected to be consumed or sold within the
normal operating cycle of a company,such as equipment, machinery and plant. It
also includes assets which are not converted into cash within 12 months from
the balance sheet date.
Non-current Tangible Assets also known as fixed assets are the assets that a company owns to carry out its business.These assets are normally not meant for resale for example land, buildings, plants, machineries,furniture, fixtures and office equipment.
Capital Work in Progress contains all the expenses
incurred for the generation of an asset before the balance sheet date. CWIP is
the work that is not yet complete but where a capital expenditure has already
been incurred.
An intangible asset is an asset that is not physical in
nature. Goodwill, brand recognition and intellectual property like patents,
trademarks and copyrights are all intangible assets.
It includes the investments made by company with and
intention of holding on for a long period of time, usually more than a year.
" Other Non-current Assets -
It includes non-current trade receivables and
non-current loans and deposits.
2. Current Assets -
It includes those assets which can be converted to cash
within 12 months of the balance sheet date. Such assets are mainly used by the
businesses to carry out their day to day operations and meet ongoing expenses.
Inventories are most important current assets of any
manufacturing or trading company. They are intended to be sold by the company
within a period of less than one year to earn profits. There are three types of
inventories - raw materials, work-in-process and finished goods.
This refers to the total amount receivable by a company
for goods sold or services provided as a part of their business operations.
Trade receivables are nearly always classified under current assets, since they
are usually receivable within a period of one year.
As the name indicates this head includes either cash or
assets that are readily convertible into cash like bank drafts, bank fixed
deposits, etc.
It includes investments which are short-term in nature
and are meant to park surplus funds to earn extra income and can be easily
en-cashed when required. Examples of such investments include - commercial
paper, mutual fund units, marketable securities, treasury bills, short-term
government bonds, etc.
" Short Term Loans & Advances -
It mainly includes short term loans or advance given to
employees, short term security deposits paid, etc.
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