How to Calculate Assets & Liabilities

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Calculating assets and liabilities is one of the most essential tasks in managing the budget of a business. Simply speaking, an asset is something owned, whereas a liability is something owed. Understanding how much your company owns and owes helps to you to properly analyze and evaluate cash flow. A business can calculate its net worth by subtracting its liabilities from its assets. This type of analysis also can assist you in making future financial decisions in terms of what will boost assets and reduce liabilities.

Assets

Add all current assets with dollar values that are used in day-to-day operations. These items include cash, inventory and accounts receivable.

Add all investments that your company owns to the total of current assets. Investments may include stocks, bonds and property.

Add capital assets to your previous total. Capital assets are items permanently owned by the company, including buildings, equipment and land.

Add any non-material assets, such as patents and copyrights, to the running total. This final total should give you the total amount of assets.

Liabilities

Add short term liabilities. These include amounts owed that must be paid within a year, such as bills, short-term loans, payroll and payments to vendors or suppliers.

Add long-term liabilities, such as mortgages or other long-term loans.

Add short-term and long-term liabilities in order to determine total liabilities.

References

Resources

About the Author

Charlotte Johnson is a musician, teacher and writer with a master's degree in education. She has contributed to a variety of websites, specializing in health, education, the arts, home and garden, animals and parenting.

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