Regardless the size of your business, you must keep asset accounts. These accounts are part of the three primary categories of balance sheet accounts which include liability accounts, asset accounts, and shareholders’ equity accounts. Assets are the resources with an economic value that your business owns and controls with the expectation that it will provide a future benefit. Examples of assets include your business premises, property, plant and equipment, inventory, and more.
Here are some of the asset accounts that you may want to keep for your business.
Cash includes client’s cheques that haven’t been deposited, petty cash funds, coins, and notes. You should keep separate general for ledger each of these types of cash. You will later combine all the amounts and report them as cash and cash equivalents or the total cash in the balance sheet.
The amount that your business is likely to receive at a future date is recorded in the accounts receivables. If you are using the accrual method of accounting, you are supposed to debit the accounts receivables at the time you sold goods on credit. Once your clients pay, you should credit the accounts receivables and debit the same amount on the cash account.
Temporary or the short-term investments include bonds, certificate of deposits, notes, and more, that is supposed to mature in less than 12 months. Besides, it may include investment in the preferred or common stock of another company especially if the stock can be sold on a stock exchange easily.
Allowance for doubtful account
Note that this is a contra asset account because its balance is a zero balance. When this balance is combined with the accounts receivables balance, the resulting amount can be termed as the net realizable value of the accounts receivables. The allowance for doubtful accounts reports the bad debts.
If you are using the accrual method of accounting, you should report revenue when the goods and services have been delivered to the clients even if no invoice has been prepared. You should record such revenue in the accrued receivables before the invoice is prepared or recorded in the accounts receivables.
Understanding the type of asset accounts you should keep for your business is the key to effectively manage your business assets, although you can engage an accounting firm and let the professional manage for you. For example, you can effectively track your cash, inventory, and more. Most importantly, all these asset accounts are used in the preparation of a balance sheet.