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Two Parts:Understanding AssetsCalculating Total Assets

People and companies need resources to put up a business and to keep that business going. In accounting, these resources are referred to as Assets. Assets are one of the essential components in constructing the financial statements, which are used by business owners to evaluate their company's performance.

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EditPart 1 of 2: Understanding Assets

  1. Determine Assets in Accounting Step 1.jpg
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    Know the definition of an asset. An asset is something valuable that a company owns. Assets add value to the company and are essential to its prolonged existence. Knowing the definition will help you to easily identify which of your company's accounts are considered assets.
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  2. Determine Assets in Accounting Step 2.jpg
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    Find out how assets are classified. In this way, you will be able to not only identify your company's actual assets, but the exact categories that each of those assets belongs to as well. Also, if you are looking at a balance sheet, you would notice that Assets are sorted into their respective categories. Assets are classified as either Current Assets or Non-Current Assets.
  3. Determine Assets in Accounting Step 3.jpg
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    Distinguish between Current Assets and Non-Current Assets. So you will know how to sort and organize your assets correctly when you are ready to calculate its value.
    • Current Assets are readily convertible into cash, and this is generally accomplished within one year or less than a year. Assets belonging to this category are cash, cash equivalents, and inventory.
    • Non Current Assets. As opposed to Current Assets, it normally takes a year or more to convert these assets into cash. Non-current assets are further classified into Tangible and Intangible Assets.
      • Tangible assets manifest a physical existence or appearance. Examples are land, equipment, building, and machinery.
      • Non-tangible assets don't have physical forms such as patents, copyrights, and goodwill. However, these resources are often treated as very vital to the continued existence of the company.
  4. Determine Assets in Accounting Step 4.jpg
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    Determine your actual Asset accounts. List down all your asset accounts in relation to what you have previously learned. This will gauge your understanding, and you also need this information in determining or calculating the value of your total assets.

EditPart 2 of 2: Calculating Total Assets

  1. Determine Assets in Accounting Step 5.jpg
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    Organize your assets. The assets are organized according to their category and starting with the most liquid to the least liquid. Liquidity is measured based on how easily the asset account can be changed into cash.
  2. Determine Assets in Accounting Step 6.jpg
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    Calculate total current assets. Add together the value of your Cash, Accounts Receivables, Supplies, Inventory, and your other assets belonging to this category. The amount will tell you how much of these principal assets were used up during a particular period and its remaining balance.
  3. Determine Assets in Accounting Step 7.jpg
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    Identify the value of total investments. Add up the value of your long-term investments or those that are held in possession for over a year. These could be in the form of bonds or stocks, as well funds that are not utilized for the business.
  4. Determine Assets in Accounting Step 8.jpg
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    Determine the total Non-current Assets. Keeping in mind that non-current assets are further classified into tangible and intangible assets, this is obtained by:
    • Adding together the value of tangible or long term assets such as land, building, equipment,
    • Deducting the amount of accumulated depreciation to derive the Net Value of property, plant and equipment. Accumulated depreciation takes into account the fact that the value of equipment, machinery, and the like is reduced over time.
    • Adding the total amount of intangible assets such goodwill, patents, copyright, etc.
  5. Determine Assets in Accounting Step 9.jpg
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    Add the amount of other assets, if there is any. The amount of other assets added to the previously derived values in each category will finally determine the total assets of the business.
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  • Determining total assets is important to most business owners because its value is often used as a basis for obtaining loans. It is also used to assess their ability to settle their financial obligations.

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Article Info

Categories: Finance and Business

Recent edits by: Zareen, Hailey Girges

In other languages:

Español: Cómo determinar activos en contabilidad, Deutsch: Bestimme die Summe des Vermögens, Português: Como Determinar os Ativos em Contabilidade, Русский: определить активы в бухгалтерском учете

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