as we said before a balance sheet is a
statement that shows what a company owns and owes every balance sheet has two
sides on one side are the firm’s assets what the company owns and on the other
side are the company’s liabilities and equity what the company owes it is
important to remember that assets stand on the left and liabilities and equity
are on the right side in this lesson we will describe the main asset accounts
our goal is to understand how these items contribute to a company’s business
cycle and the nature of the asset accounts in a balance sheet the cash
account is one of the most important drivers for business it shows how much
of the firm’s assets are cash or can easily be converted into cash it shows
us the company’s liquidity we know that a business cannot function properly if
sufficient cash is not available for its day-to-day operations we must be able to
pay suppliers employees give change and so on the next important item we will
see on the asset side is accounts receivable also known as trade
receivables when customers buy our products they must pay for them right
and until they do we will register this amount in accounts receivable which
indicates the money owed by customers we as a company register we have earned a
payment from these customers that has not yet been received inventory is the
account that shows the value of raw materials goods in the process of
elaboration and finished goods ready to be shipped to customers the company has
these goods in its warehouse in production facilities or in stores
finished goods are products ready to be sold to customers while raw materials
and work-in-progress goods require additional processing raw materials are
the basic components we need to create the product and work-in-progress goods
are products that have gone through a few stages of elaboration but are not
ready to be shipped to customers and still need processing property plant and
equipment are a group of assets that are vital to business operations imagine a
production company it needs plants and equipment to
transform raw materials into finished products usually this is a hefty
investment that cannot be easily liquidated the value of existing
property plant and equipment is reduced each year or should we say depreciated
to account for the fact that the asset will be obsolete after its useful
economic life ends P P and D is typically made of assets such as land
and buildings cars other vehicles furniture office equipment computers
plant and machinery and so on we should point out that the main distinction we
can make between different assets is whether they can be considered current
or non-current cash receivables and inventory are three excellent examples
of current items they can easily be converted into cash PP&E assets are a
great example of assets that are difficult to convert in cash and are
therefore classified as non current okay in this video we explained the main
assets we will see in a balance sheet and what stands behind each type of
assets in our next lesson we’ll continue with liabilities thanks for watching