Free small business accounting software focuses primarily on assets. Assets can be described as valuable resources owned by a company, which were acquired at a measurable monetary cost. As an economic resource, they meet three requirements. First, the resource must be valuable. A resource is valuable if it is cash/convertible to cash; or it may provide future benefits to the company’s operations. Second, the resource must be owned. Mere possession or control of a resource would not constitute an asset; must be property in the legal sense of the term. Finally, the resource must be acquired at a measurable monetary cost. In cases where an asset is not purchased for cash or a promise to pay cash, the question is how much it would have cost if it had been paid for in cash.
Assets on the balance sheet are listed in order of liquidity – how quickly they are expected to be converted into cash – or in reverse order, ie fixed or least liquid (fixed) value first followed by others. All assets are grouped into categories; that is, assets with similar characteristics are placed in one category. Assets included in one category are different from those in other categories. The standard classification of assets divides them into fixed assets, current assets, investments, and other assets.
Fixed assets are fixed in the sense that they are acquired to be kept in business long-term to produce goods and services, not to be resold. Unlike fixed assets, current assets are short-term in nature. They refer to assets/resources that are held in the form of cash or are expected to be realized in cash within the accounting period or the normal operating cycle of the business. Investments represent the investment of funds in securities of another company.