Example of an asset that is NOT recorded on a Balance Sheet - Essay Example

While scrutinizing a business and assessing its worth it is of almost importance to get a thorough and detailed understanding of the particulars recorded in the balance sheet and how are they measured . In the balance sheet, assets denotes the resources of a business that it has attained over a time and which have some economic value. Companies usually acquire assets through investing activities, operating activities or financing activities.

Liquidity refers to the concept of how fast can an asset be converted into cash. Therefore, assets in a balance sheet are listed according to the order of liquidity. The category of assets section is divided in to two sub-categories namely, current assets and non-current assets. Currents Assets are those assets which are predicted to stay with the business for more than twelve months. Both current and non current assets belong to the tangible form of assets.

This also, infers that the assets that are recorded in the balance sheet or any other financial statement are actually tangible asset that are those assets which have some physical form and value where as the assets that can not be evaluated and seen physically are called intangible assets. Such assets as intangible assets can not be recorded in any financial statement, particularly not in the balance sheet. Goodwill of a company falls under the heading of an intangible asset and thus, it is not recorded in the books of the companies as it is defined in terms of the positive reputation of a firm that does not have a physical existence, but is of utmost importance for a business.

Patents, copyrights, and trademarks are also other examples of intangible assets which are not recorded in the balance sheet. Good customer relations, a strong brand name, good employee relations, any patents or propriety