What is Total Assets Formula?
Assets are defined as resources owned by the company from which future economic benefits are expected to be generated. Total assets are the sum of non-current and current assets, and this total should equal the sum of stockholders’ equity and total liabilities combined.
The formula for Total Asset is:
Note:
- Current Assets: Current AssetsCurrent AssetsCurrent assets refer to those short-term assets which can be efficiently utilized for business operations, sold for immediate cash or liquidated within a year. It comprises inventory, cash, cash equivalents, marketable securities, accounts receivable, etc.read more are those assets that are expected to be converted into cash or cash equivalents within one financial year.
- Non-Current Assets: Non-Current AssetsNon-Current AssetsNon-current assets are long-term assets bought to use in the business, and their benefits are likely to accrue for many years. These Assets reveal information about the company's investing activities and can be tangible or intangible. Examples include property, plant, equipment, land & building, bonds and stocks, patents, trademark.read more are those assets that a company holds for more than one financial year, which are not readily convertible into cash or cash equivalentsCash Or Cash EquivalentsCash and Cash Equivalents are assets that are short-term and highly liquid investments that can be readily converted into cash and have a low risk of price fluctuation. Cash and paper money, US Treasury bills, undeposited receipts, and Money Market funds are its examples. They are normally found as a line item on the top of the balance sheet asset. read more.
Examples of Total Assets Formula (with Excel Template)
Let’s see some simple to advanced examples of total assets equationAssets EquationTotal Assets is the aggregate of liabilities and shareholder funds. It can also be computed by combining current and noncurrent assets.read more to understand it better.
Example # 1
The following are the asset details of a small manufacturing company for the year ended 31st March 2019.
- Land = Rs.10,00,000
- Machinery = Rs.5,00,000
- Buildings = Rs.6,00,000
- Sundry Debtors = Rs.2,00,000
- Inventory = Rs.3,50,000
- Cash & Bank = Rs.1,00,000
Solution:
Use the following data for the calculation of total assets.
So, the calculation of total assets can be done as follows –
Total Assets = Land + Buildings + Machinery + Inventory + Sundry Debtors + Cash & Bank
Total Assets = 1000000+600000+500000+350000+200000+100000
In the above total assets formula, non-current assets are Land, Buildings & Machinery, otherwise known as fixed assetsFixed AssetsFixed assets are assets that are held for the long term and are not expected to be converted into cash in a short period of time. Plant and machinery, land and buildings, furniture, computers, copyright, and vehicles are all examples.read more.
Total Assets will be –
Total Assets = 2750000
Hence, the total assetsTotal AssetsTotal Assets is the sum of a company's current and noncurrent assets. Total assets also equals to the sum of total liabilities and total shareholder funds. Total Assets = Liabilities + Shareholder Equityread more would be calculated as Rs. 27,50,000.
Example # 2
The following are the asset details of a medium-sized company for the year ended 31st March 2019.
- Land = Rs.20,00,000
- Inventory = Rs. 40,00,000
- Buildings = Rs.60,00,000
- Sundry Debtors = Rs. 30,00,000
- Vehicles = Rs.22,00,000
- Cash & Bank = Rs. 25,00,000
Solution:
Note:
- Accumulated DepreciationAccumulated DepreciationThe accumulated depreciation of an asset is the amount of cumulative depreciation charged on the asset from its purchase date until the reporting date. It is a contra-account, the difference between the asset's purchase price and its carrying value on the balance sheet.read more on Buildings = Rs. 20,00,000
- Accumulated Depreciation on Vehicles = Rs. 6,00,000
- Accumulated Depreciation on Machinery = Rs. 3,50,000
So, the calculation of total assets can be done as follows –
Total Assets = Land + Buildings – Acc. Depreciation on BuildingsDepreciation On BuildingsDepreciation of building refers to reducing the recorded cost of a building until the value of the structure either becomes zero or reaches its salvage value. In addition, it helps to map the revenue in the form of lease rental generated during the corresponding expenses.read more + Vehicles – Acc. Depreciation on Vehicles + Machinery – Acc. Depreciation on Machinery + Inventory + Sundry Debtors + Cash & Bank
Total Assets = 2000000+6000000-2000000+2200000-600000+1500000-350000+4000000+3000000+2500000
Total Assets will be –
Total Assets = 18250000
Hence, the total assetsTotal AssetsTotal Assets is the sum of a company's current and noncurrent assets. Total assets also equals to the sum of total liabilities and total shareholder funds. Total Assets = Liabilities + Shareholder Equityread more would be calculated as Rs. 1,82,50,000.
In this example, we are observing the concept of Gross vs. Net Book ValueNet Book ValueNet book value refers to the carrying value of the corporate assets acquired after accounting for depreciation, as reported in the company's balance sheet. An asset's net book value is calculated as "Net Book Value = Original Purchase Cost – Accumulated Depreciation".read more. While calculating total assets, it is important to note that the fixed assets should be stated at Net Value (Gross Value – Accumulated depreciation). It is assumed that the building, vehicle and machinery value provided is gross (at cost).
Hence, In the above total assets equation – Accumulated depreciation(Building, Vehicles, machinery) are subtracted from the gross value.
Example # 3
The following are the asset details of a large company for the year ended 31st March 2019.
- Land =Rs.5,00,000
- Inventory =Rs. 50,00,000
- Buildings =Rs.70,00,000
- Sundry Debtors =Rs. 20,00,000
- Vehicles =Rs.12,00,000
- Cash & Bank =Rs. 32,00,000
- Furniture =Rs.40,00,000
- Prepaid Expenses =Rs. 10,00,000
- Bills Receivable =Rs.15,00,000
- Bad Debts Provision =Rs. 1,50,000
So, the calculation of total assets can be done as follows –
Total Assets = Land + Buildings + Vehicles + Furniture + Bills Receivable + Inventory + Prepaid Expenses + Sundry Debtors – Bad Debts ProvisionBad Debts ProvisionA bad debt provision refers to the reserve made by a company to set aside an amount computed as a specific percentage of overall doubtful or bad debts that has to be written off in the next year.read more + Cash & Bank
Total Assets = 500000+7000000+1200000+4000000+1500000+5000000+1000000+2000000+3200000-150000
Total Assets will be –
In the above total assets equation, current assets are Bills Receivable, Inventory, Prepaid ExpensePrepaid ExpensePrepaid expenses are expenses for which the company paid in advance in an accounting period but which were not used in the same accounting period and have yet to be recorded in the company's books of accounts.read more, Sundry Debtors, and Cash & Bank.
Total Assets = 25250000
Hence, the total assetsTotal AssetsTotal Assets is the sum of a company's current and noncurrent assets. Total assets also equals to the sum of total liabilities and total shareholder funds. Total Assets = Liabilities + Shareholder Equityread more would be calculated as Rs. 2,52,50,000.
In the above example, it is important to note the following distinctive assets:-
- Bills receivable are bills of exchangeBills Receivable Are Bills Of ExchangeBills of exchange are negotiable instruments that contain an order to pay a certain amount to a particular person within a stipulated period of time. The bill of exchange is issued by the creditor to the debtor when the debtor owes money for goods or services.read more against which the company will receive payment in the future. Generally, these are issued when the company has provided a credit saleCredit SaleCredit Sales is a transaction type in which the customers/buyers are allowed to pay up for the bought item later on instead of paying at the exact time of purchase. It gives them the required time to collect money & make the payment. read more (i.e., with no inflow of cash on sales).
- Prepaid expenses reported as a current asset, represents the amount of prepaid expense which will be used up within one (current) financial year. This represents the payment made by the company for goods or services to be received in the future.
- Debtors are to be stated at ‘net value,’ which is after subtracting the provision for bad and doubtful debts. This provision indicates the extent of receivables which the company is not confident of retrieving from the debtors.
Example # 4
The following are the asset details of a large manufacturing company for the year ended 31st March 2019.
- Land = Rs20,00,000
- Inventory = Rs. 40,00,000
- Buildings = Rs60,00,000
- Sundry Debtors = Rs. 30,00,000
- Vehicles = Rs22,00,000
- Cash & Bank = Rs. 25,00,000
- Furniture = Rs15,00,000
- Trademarks = Rs. 27,00,000
- Investments = Rs40,00,000
- Goodwill= Rs. 6,50,000
- Machinery = Rs80,00,000
Note:
- Accumulated Depreciation on Buildings = Rs. 20,00,000
- Accumulated Depreciation on Vehicles = Rs. 6,00,000
- Accumulated Depreciation on Machinery = Rs. 3,50,000
- Furniture was purchased on the last day of the financial year.
Solution:
So, the formula of total assets and calculation can be done as follows –
Total Assets = Land + Buildings – Acc. Depreciation on BuildingsDepreciation On BuildingsDepreciation of building refers to reducing the recorded cost of a building until the value of the structure either becomes zero or reaches its salvage value. In addition, it helps to map the revenue in the form of lease rental generated during the corresponding expenses.read more + Vehicles – Acc. Depreciation on Vehicles + Machinery – Acc. Depreciation on Machinery + Furniture + Investments + Trademarks + Goodwill + Inventory + Sundry Debtors + Cash & Bank
Total Assets = 2000000 + 6000000 + 2200000 +8000000 + 1500000 + 4000000 + 2700000 +650000 + 4000000 + 3000000 + 2500000 – 2000000 – 600000 – 3500000
Total Assets will be –
Total Assets = 30450000
Hence, the total assetsTotal AssetsTotal Assets is the sum of a company's current and noncurrent assets. Total assets also equals to the sum of total liabilities and total shareholder funds. Total Assets = Liabilities + Shareholder Equityread more would be calculated as Rs. 3,04,50,000.
In the above example, it is important to note the following distinctive assets:-
- Since the furniture was purchased on the last day of the financial year, there was no depreciation for the same.
- Investments may be considered as long-term since no specification is made regarding the same. This indicates they are assets that a company intends to hold for more than a year, i.e., securities, real estate, etc.
- Trademarks are intangible assetsIntangible AssetsIntangible Assets are the identifiable assets which do not have a physical existence, i.e., you can't touch them, like goodwill, patents, copyrights, & franchise etc. They are considered as long-term or long-living assets as the Company utilizes them for over a year. read more that represent the legal right to use a name, logo, or other identifiers in business. When a trademark is assigned a value as in this example, it is usually the fair value of the same when purchased from someone else.
- GoodwillGoodwillIn accounting, goodwill is an intangible asset that is generated when one company purchases another company for a price that is greater than the sum of the company's net identifiable assets at the time of acquisition. It is determined by subtracting the fair value of the company's net identifiable assets from the total purchase price.read more is also an intangible asset that represents the difference between the market value of the company and book value of assetsBook Value Of AssetsBook Value of Assets is the asset's value in the books of records of a company or an institution at any given instance. Assets Book Value Formula = Total Value of an Asset – Depreciation – Other Expenses Directly Related to it read more (as per Balance Sheet).
Conclusion
The various types of assets can be categorized into Non-Current and Current. This would be dependent on their usage and significance to the operations of the company. Broadly, however, total assets are calculated by the summation of all value of current and non-current assets after adjusting for accumulated depreciation and any write-offWrite-offWrite off is the reduction in the value of the assets that were present in the books of accounts of the company on a particular period of time and are recorded as the accounting expense against the payment not received or the losses on the assets.read more or provision of receivables. Other variations are dependent on the applicability of accounting standards.
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