Aspects Of Assets And Their Importance

1086 WordsDec 15, 20145 Pages
This paper attempts to explain aspects about assets and their importance in accounting to report accurate information about the company. Assets give an indication as to the strength of the business, its ability to generate income, the capability to produce a profit and the means it has to pay its debt. Creditors and shareholders have a vested interest in making sure their notes will be paid, or profits will be generated. Assets – Current and Non-Current Introduction Throughout all business, there is a basic accounting equation that is used to account for what a company owns and what it owes. This equation allows the business to report what the business looks like in financial terms. Businesses exist to provide a service or product to the consumer; however, it must account for how it accomplishes this task. Keeping accurate accounting report policies in place to help provide transparency to creditors who may have a vested interest in the business. The basic accounting equation is “Assets = Liabilities + Stockholders’ Equity (Weygandt, Kimmel, Kieso, 2007. p. 14)”. Assets are resources. Liabilities are the claims by creditors, and any remaining balance is what is owed to the stockholder of the business. This equation is represented on the financial statement known as the balance sheet. Companies also produce financial reports which help identify the flow of resources over time. Financial reports include “income statements, retained earnings statements, and the
Open Document