![]() ![]() ![]() Using accounting software can help ensure that each journal entry you post keeps the formula in balance. $10,000 increase assets = $10,000 increase liabilities + $0 change equity The company posts a $10,000 debit to cash (an asset account) and a $10,000 credit to bonds payable (a liability account). This can provide the necessary information behind how much liquid funds they could produce in the event that those assets had to be sold.Īssets on the left side of the accounting equation must stay in balance with liabilities and equity on the right side of the equation:Īssume that a firm issues a $10,000 bond and receives cash. Notes receivable: Amounts you are owed that will be paid within 12 months.Ĭurrent assets are important because they can be used to determine a company’s owned property.Investments in this category are also defined as marketable securities. Some investments may be categorized as noncurrent, but most are current assets. Investments: Money market account balances, stocks, and bonds.These cash payments are assets because the cost has already been incurred. ![]() Prepaid expenses: Expenses you’ve paid in advance, such as six months of insurance premiums.Inventory: Items purchased for resale to customers.Accounts receivable: The amount that your customers owe you after buying your goods or services on credit.Cash equivalents refer to short-term, high-quality investments, including certificates of deposit (CDs) and commercial paper. Cash and cash equivalents: The total amount of cash on hand.Current assets are a representation of assets including cash and objects that will be converted into liquid assets within 12 months. ![]()
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