These are items bought in the business not for resale but to be used over a period of several years. These assets are of a long term nature. Examples of Fixed Assets would include machinery, building and furniture.
These are items in the business which are used up and change daily in the normal operation of the business. These are the revenue generating assets and they are of a temporary nature. Examples of Current assets would include stock of goods for sale, debtors and business cash.
Liability Accounts are usually classified (put into distinct groupings, categories, or classifications) on the balance sheet. The liability classifications and their order of appearance on the balance sheet are:
These represent money which the business owes and is obligated to settle within one year. Examples of current liabilities would include Creditors for goods purchases, and unpaid utility expenses
–Long Term Liabilities
These represent money which the business owes and is obligated to settle within one year. Examples of long term liabilities would include Loan to buy motor vehicle, Mortgage.
Let’s illustrate this statement with a simple equation.
Capital at End = Capital at Beginning + Additional Capital Contributed + Profit or (– Loss ) – Draws
Capital is increased by money or property contributed and any profits the business earns from operation.
Capital is decreased by withdrawals made by the owner or loss by the business.
Drawings represent amounts the owner withdraws from his business for personal use.