Assets and liabilities are fundamental concepts in the accounting of any company. They are regulated by national accounting standards (NAS), which provide a clear and consistent structure for managing economic resources and financial obligations. Effective management of assets and liabilities helps create a reliable financial foundation, allowing a company to develop stably and comply with NAS requirements.
Assets represent the economic resources owned or controlled by the company, intended to generate future economic benefits. Under NAS, assets are classified based on their nature and usage period. They can be:
Non-current (long-term) assets. These are resources used in the long term, such as buildings, equipment, or land, and not intended for quick sale. These assets contribute to income generation over more than one year.
Current (short-term) assets. These are resources that will be used or converted into cash within a short period, typically within one year. Examples of current assets include inventories, trade receivables, and cash.
According to NAS, assets must be valued and recorded in the balance sheet at fair value or historical cost, depending on their nature.
It is also important to periodically revalue non-current assets to accurately reflect their value in the accounting balance.
Liabilities – financial obligations of the company
Liabilities represent the financial obligations of a company to third parties. These obligations can be in the form of debts, loans, or other legal commitments. According to NAS, liabilities are classified as:
Long-term liabilities. These include obligations with a maturity period longer than one year, such as long-term bank loans, issued bonds, or other forms of financing.
Short-term liabilities. These are obligations that must be settled within one year, such as trade payables, short-term loans, or taxes and contributions payable.
Effective management of liabilities is necessary to maintain optimal liquidity levels and avoid solvency issues.
The relationship between assets and liabilities
A company's balance sheet is based on the relationship between assets and liabilities. The difference between assets and liabilities represents equity, which reflects the company's net worth. According to NAS, maintaining a balance between assets and liabilities is crucial to ensuring the financial stability of the company and providing a clear picture of its financial position.
An important aspect of managing assets and liabilities is analyzing the financial structure (the total funding sources).
For example, a high ratio of current assets to short-term liabilities can indicate the company's good ability to cover its current obligations, which is a positive signal for investors and creditors.
Key takeaways
In accounting, assets and liabilities are the basis of any financial reporting. Understanding and properly managing these elements in accordance with NAS is essential for efficient financial management and maintaining transparency in the company's financial status. Whether we are talking about economic resources or financial obligations, the balance between them is key to the success of any business, contributing to sustainable growth and minimizing risks.