Agribusiness Library

Agribusiness Library

LESSON L060086: ASSETS AND LIABILITIES

Objectives1. Define current assets and identify examples of current assets.

2. Define non-current (or long-term) assets and identify examples of non-current assets.

3. Define current liabilities and identify examples of current liabilities.

4. Define non-current (long-term) liabilities and identify examples of non-current liabilities.

Terms•Accounts payable•Accounts receivable•Assets•Buildings•Capital assets•Cash•Current assets•Current liabilities•Interest on liabilities•Land

Terms•Liability•Long-term leases•Machinery•Non-current (or long-term) assets•Non-current (or long-term) liabilities•Operating loans•Pension funds•Pre-paid expenses•Principal balances on loan

Terms•Principal payments on non-current liabilities•Rent payments•Stocks•Taxes•Wages

Assets are items that an individual or business owns that can be listed on a financial statement.

Current assets are items that an individual or business owns that can be sold to generate cash quickly. Examples of current assets include:

A. Cash —assets in the form of cash, checking account, or savings account values. Estimated cash value can also be applied to stored grain,

market livestock, and other agriculture products, such as hay or straw.

B. Stocks —shares of capital that an individual or business can own and resell. Stocks increase and decrease in value due

to the fluctuation of the market and economy.

C. Accounts receivable —income an individual or business is expecting to receive for products or services.

D. Pre-paid expenses —business expenses that have been paid for that have not yet been used, such as fertilizer, seed, and chemical expenses.

Non-current (or long-term) assets are products and inventory an individual or business owns that will be used for more than one calendar year. Examples of non-current (or long-term) assets are:

A. Land —any acreage area owned by an individual or business.

B. Buildings —permanent structures that are owned by an individual or business. Examples of buildings include sheds, grain bins, garages,

pole barns, or any other permanent structure.

C. Machinery —engine-powered equipment that can be used for business or personal use. Examples of machinery include trucks, tractors, sprayers,

ATVs, lawn mowers, irrigation equipment, or any other types of equipment.

D. Capital assets —include any personal assets that are used for business purposes that will last for more than one year. This may include equipment or breeding livestock.

E. Pension funds or other long-term investments—money deposited with a financial institution to create a retirement fund. Often, a business will automatically deduct a certain portion

of each employee’s paycheck to deposit into a pension fund.

Liability refers to money owed for a product or service.

Current liabilities are items that must be paid within the next year. Examples of current liabilities are:

A. Accounts payable —bills that are owed to businesses or individuals within the current operating year. Examples may include seed, chemical, feed, or fertilizer

bills.

B. Operating loans —money that is borrowed in order to cover immediate expenses necessary for the business to function.

C. Taxes —money owed to the government. A percentage of each dollar of

income is paid to the government in the form of taxes.

D. Rent payments —money owed to owners of property in exchange for the use of their land, buildings, pasture, or other property or structures.

E. Interest on liabilities —money owed to financial institutions in exchange for money borrowed.

F. Principal payments on non-current liabilities —the initial payment for items that are purchased within the current year. The value of the capital item will be classified as a non-

current asset, whereas the remaining value owed on the item is a non-current liability.

G. Wages —payments made to employees in exchange for their service.

Non-current (or long-term) liabilities refers to money owed on a product, service, or inventory item. Examples of non-current (or long-term) liabilities include:

A. Long-term leases —agreements made with property owners where money is owed to the owner in exchange for the use of the property.

B. Principal balances on loans (for land, buildings, machinery, or other capital items)—the total amount of money left over on a loan that must be paid before transferring ownership.

REVIEW•What are current assets and what are some examples of current assets?

•What are non-current (or long-term) assets and what are some examples of non-current assets?

REVIEW•What are current liabilities and what are some examples of current liabilities?

•What are non-current (or long-term) liabilities and what are some examples of non-current liabilities?