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Assets are classified into two major types, one is current and the other is non-current or long-term.
1. Current Assets: These are assets either expected to be converted into cash or used within one year. These include: i.) Cash and cash equivalents Cash, bank balances, etc. ii.) Accounts receivable Amounts owed to the company by customers. iii.) Inventory Raw materials, work-in-progress, and finished goods. iv.) Prepaid expenses Payments made in advance for goods or services.
2. Non-Current Assets: These are long-term assets that provide value over a period longer than one year. Examples include:
i.) Property, plant, and equipment (PPE): Land, buildings, machinery, and other physical assets.
ii.) Intangible assets: Patents, trademarks, copyrights, and goodwill.
iii.) Investments: Stocks, bonds, or other long-term investments.
To prepare the asset side of your balance sheet, first, make a list of all the current assets by liquidity-the easier it is to liquidate, the higher in the list it gets-and then non-current assets.
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