Welcome back! You've learned how to prepare financial statements. But what exactly are all those assets and liabilities you're putting on the balance sheet?

Let's dive deeper into the major categories that make up your financial position!

Engagement Message

Name one business decision that benefits from knowing asset and liability types.

Not all assets are created equal! Some assets can quickly become cash (like money in your checking account), while others take much longer (like buildings).

This difference is crucial for understanding your business's liquidity - how easily you can pay bills.

Engagement Message

Which would be more useful for paying next week's rent: cash or a building?

Accountants organize assets into two main groups: Current Assets and Non-Current Assets (also called Long-Term Assets).

Current assets can reasonably be converted to cash within one year. Non-current assets take longer than a year.

Engagement Message

Is “inventory for sale” a current asset or a non-current asset?

Cash is the ultimate current asset - it's already money! This includes cash in registers, checking accounts, savings accounts, and petty cash.

Cash appears first on the balance sheet because it's the most liquid asset possible.

Engagement Message

Why do you think cash appears first on the balance sheet?

Accounts Receivable represents money customers owe you for goods or services already delivered. It's like IOUs from your customers.

Since customers typically pay within 30-60 days, accounts receivable is also a current asset.

Engagement Message

Is accounts receivable more or less liquid than cash?