Assets and liabilities in small businesses: learn how to calculate
Posted: Sun Jan 19, 2025 10:58 am
Many Brazilian entrepreneurs believe that accounting is a complicated task. Accounting books, technical terms and a series of additional obligations are part of the routine of accounting professionals. Some entrepreneurs decide to avoid bureaucracy and delegate all tasks to the accounting team. Of course, this is a mistake!
Obviously, entrepreneurs won't become accountants overnight. However, making an effort to learn some accounting concepts can help you better understand the situation of your company's assets. That's exactly why we decided to bring you some tips for calculating assets and liabilities in small businesses in today's post. Check it out below!
The company's assets
First, it is important to conceptualize the self employed database of assets in a company. In accounting terms, assets are the sets of goods and rights of an organization that can be converted into money. We are talking about the application of resources (remember this term).
In this case, the assets can be tangible, intangible, immovable and movable. Rights, on the other hand, correspond to amounts receivable , such as invoices, accounts receivable , among others.
The liabilities
On the other hand, we must also define an organization's liabilities. If assets are goods and rights, liabilities are its obligations and, therefore, are on diametrically opposite sides of the balance sheet. On the other hand, liabilities are considered sources of resources.
As obligations, understand the salaries to be paid, rent, company bills, taxes in general, among others.
The net worth
Wait, isn't the text about liabilities and assets? Don't worry, you'll understand. We still need to define net equity, which is the entity's own resources and is also considered a source of funds. The calculation includes share capital, profit or loss for the period, reserves, among other things.
With net equity, we have the last missing piece to complete the so-called balance sheet.
The balance sheet and the basic accounting equation
As we have seen, the balance sheet is made up of assets, liabilities and equity. It is with this accounting statement that we can know the economic situation of the company at a given point in time.
The word balance sheet does not exist for nothing, after all, we are talking about the balance between assets, liabilities and net equity, which can be expressed in the formula below, known as the basic accounting equation:
Assets = Equity + Liabilities
or
Applications = Origins
Note that, in the same way that we found the formula for assets, we can also develop the formula for liabilities. Simply transfer the net equity to the other side of the equation. In this case, we would have:
Liabilities = Assets – Equity
Calculating assets and liabilities in small businesses is easier than you might think. After all, business resources are still limited and we can easily track them. The most important thing is to understand that the result of the basic accounting equation can provide very important information about the financial and economic health of your business.
Obviously, entrepreneurs won't become accountants overnight. However, making an effort to learn some accounting concepts can help you better understand the situation of your company's assets. That's exactly why we decided to bring you some tips for calculating assets and liabilities in small businesses in today's post. Check it out below!
The company's assets
First, it is important to conceptualize the self employed database of assets in a company. In accounting terms, assets are the sets of goods and rights of an organization that can be converted into money. We are talking about the application of resources (remember this term).
In this case, the assets can be tangible, intangible, immovable and movable. Rights, on the other hand, correspond to amounts receivable , such as invoices, accounts receivable , among others.
The liabilities
On the other hand, we must also define an organization's liabilities. If assets are goods and rights, liabilities are its obligations and, therefore, are on diametrically opposite sides of the balance sheet. On the other hand, liabilities are considered sources of resources.
As obligations, understand the salaries to be paid, rent, company bills, taxes in general, among others.
The net worth
Wait, isn't the text about liabilities and assets? Don't worry, you'll understand. We still need to define net equity, which is the entity's own resources and is also considered a source of funds. The calculation includes share capital, profit or loss for the period, reserves, among other things.
With net equity, we have the last missing piece to complete the so-called balance sheet.
The balance sheet and the basic accounting equation
As we have seen, the balance sheet is made up of assets, liabilities and equity. It is with this accounting statement that we can know the economic situation of the company at a given point in time.
The word balance sheet does not exist for nothing, after all, we are talking about the balance between assets, liabilities and net equity, which can be expressed in the formula below, known as the basic accounting equation:
Assets = Equity + Liabilities
or
Applications = Origins
Note that, in the same way that we found the formula for assets, we can also develop the formula for liabilities. Simply transfer the net equity to the other side of the equation. In this case, we would have:
Liabilities = Assets – Equity
Calculating assets and liabilities in small businesses is easier than you might think. After all, business resources are still limited and we can easily track them. The most important thing is to understand that the result of the basic accounting equation can provide very important information about the financial and economic health of your business.