As many of us know, accounting is the language of business. That is why this tool is essential for the proper functioning of a company. Thus, based on this need, it is how the career of business administration arises.
These professionals have the necessary skills to be able to take advantage of financial accounting and carry out their duties, promoting the development of the company.
In the same way, he is capable of developing corporate strategies that adapt to the needs of companies and achieve their goals.
Now, this area of ​​study covers a lot of concepts that are key to its understanding. Among the main ones that we can find we have the concept of assets and liabilities. These form the backbone of modern accounting.
In this article we will explain what assets and liabilities are about. In addition to the classification that each of them has.
What is a long-term and short-term asset account?
Asset accounts are all those goods and services that a company owns. However, they are limited under the implementation to exercise a particular productive activity.
This means that the assets of a company refer only to the goods and services that are part of the productive system of a company. This definition also includes accounts receivable and those accounts that generate a contribution in the future.
Similarly, assets are one of the three elements that make up the balance sheet equation. The most important in accounting.
The main way to categorize the assets of a company is in two categories, these are raised based on the lifetime of the asset within the production system managed by the company. These categories are long-term assets and short-term assets.
long-term assets
They are all those goods and services that the company has and whose duration is greater than one year. In other words, once the one-year term has expired, the asset continues to be involved in the company’s processes.
Therefore it remains useful, without the need for the company to sell it. So within this category we can find:
- patents
- licenses
- Buildings
- Machinery
- processes
- Software
- land
- vehicles
- Long-term financial investments
short-term assets
They are all goods and services whose duration within the company’s processes is less than one year. These goods are in constant circulation. Well, this is how the company can obtain benefits from these.
The objective of short-term assets is for the company to sell them in order to take advantage of their liquidation. Some short-term assets are the following:
- Short-term investments
- Commodity
- Clients or subscribers
- small boxes
What is a long-term and short-term liability account?
Liabilities are all the debts and obligations that a company owns. Like the assets, only the debts and obligations that are involved within the productive apparatus of said company are considered liabilities.
In the same sense, liabilities are those collections or obligations that must be paid in the future, for actions carried out in the past. In addition, liabilities are also part of the balance sheet equation.
Liabilities can be classified according to the time available for the company to respond to obligations or debts. In this way, they are classified into short-term liabilities and long-term liabilities.
short-term liabilities
They are those obligations and debts that must be met in a period of less than one year. Therefore, it makes references to the annual or monthly obligations that the company may have. As can be the case of public services. Similarly, among these accounts we can find the following:
- Wages
- Rents (Equipment, real estate or facilities)
- Short term debts
- Taxes
- short-term loans
Long term passives
These are the debts or obligations that the company has to respond to in a period greater than one year. These accounts are also known as fixed liabilities. Some long-term liabilities are:
- Long term debts
- Bank loans
- mortgages
- deferred taxes
