- Asset Accounts
- Assets in Accounting
- Total Assets
- Total Assets Formula
- Fixed Assets
- Fully Depreciated Assets
- List of Assets
- Types of Assets
- Examples of Assets
- Net Assets
- Book Value of Asset
- Fixed Assets Accounting
- Net Asset Formula
- Assets Formula
- Net Fixed Assets
- Property Plant and Equipment (PP&E)
- Cash and Cash Equivalents | Examples, List & Top Differences
- Cash Equivalents
- Restricted Cash
- Inventories List
- 3 Types of Inventory | Raw Material | WIP | Finished Goods
- WIP Inventory (Work-in-Progress)
- Raw Material Inventory
- Lower of Cost or Market
- Inventory Write-Down
- Periodic Inventory System
- Ending Inventory Formula
- Average Inventory Formula
- Closing Stock
- Carrying Amount
- Carrying Value
- Inventory vs Stock
- Is Inventory a Current Asset?
- Current Assets
- Short Term Investments on Balance Sheet
- Current Assets vs Non-Current Assets
- Current Assets Examples
- Current Assets List
- Current Assets Formula
- Other Current Assets
- Short Term Assets
- Assets Revaluation
- FIFO vs LIFO
- First In First Out (FIFO)
- Last in First Out (LIFO)
- LIFO Reserve
- LIFO Liquidation
- Non-Current Assets
- Accounts Receivables? | Definition, Accounting Examples
- Is Account Receivable - An Asset or Liability?
- Accounts Receivable Examples
- Accounts Receivable Process
- Is Accounts Receivable an Asset?
- Accounts Receivable - Debit or Credit?
- Accounts Receivables Factoring
- Recourse in Factoring
- Accounts Receivable Financing
- Accounts Receivable Journal Entry
- Net Realizable Value Formula
- Trade Receivables
- Net Realizable Value (NRV)
- Allowance for Doubtful Accounts
- Accrued Revenue
- Accrued Revenue Examples
- Deferred Revenue Expenditure
- Deferred Revenue Examples
- Liquid Assets
- Liquid Assets Examples
- Financial Assets
- Financial Assets Examples
- Financial Assets Types
- Quick Assets
- Marketable Securities on the Balance Sheet | Top Examples
- Marketable Securities Examples
- Non-Marketable Securities
- Trading Securities in Balance Sheet
- Prepaid Expenses
- Prepaid Expense Examples
- Prepaid Insurance
- Intangible Assets List
- Tangible vs Intangible Assets
- Net Tangible Assets
- Tangible vs Intangible
- Contingent Asset
- Tangible Assets
- Deferred Tax
- Deferred Income Tax
- Deferred Tax Assets
- Capital Expenditure (Capex)
- Capex Calculation
- Capital Expenditure Examples
- Capex vs Opex
- Salvage Value
- Residual Value
- Working Capital Management Importance
- Working Capital Examples
- Working Capital Loan
- Fixed Capital vs Working Capital | Top 8 Differences (Infographics)
- Impariment of Assets
- Goodwill Formula
- Goodwill Amortization
- Goodwill Impairment Test
- Intangible Assets
- Intangible Assets Examples
- Negative Goodwill
- Goodwill Valuation
- Capitalized Interest
- Accounting Basics (80+)
- Bookkeeping (52+)
- Balance Sheet (30+)
- Liabilities (68+)
- Shareholders Equity (91+)
- Income Statement (158+)
- Cash Flow Statement (17+)
- Accounting Careers (26+)
- Accounting Books (8+)
- Budgeting in Finance (31+)
What are Total Assets?
Total Assets, most commonly used in the context of a corporation, is defined as the assets owned by the entity that has economic value whose benefits can be derived in the future. Assets are recorded in the balance sheet of the firm.
- Assets are further classified into liquid assets and illiquid assets depending on their liquidity. A liquid asset is that asset that can be easily converted into cash or readily sold for cash otherwise it is called an Illiquid asset.
- Assets are also classified on the balance sheet as either current assets or long-term assets. A current asset is that asset which can be liquidated within a year, whereas, long-term assets are those assets which are liquidated in more than a year.
Total Assets Types
Here is the list of total asset types
- Cash & cash equivalents
- Marketable securities
- Account Receivables
- Prepaid Expenses
- Fixed Assets
- Intangible Assets
- Various other assets
Total Assets Formula
Basic Formula in accounting is expressed as:-
The equation must balance because everything the firm owns must be purchased from debt (liabilities) and capital (Owner’s or Stockholder’s Equity).
The extended accounting equation, after considering sales revenue and expenses, is expressed as:-
Examples of Total Assets
The following are examples of Total Assets Formula
If a business owns a piece of real estate where the owner’s equity worth $250,000, and they owe $180,000 on a loan for that real estate, what is the value of Assets?
- Owner’s Equity=$250,000
Therefore, the calculation of total assets will be
The summaries of the balance sheet and income statement data follow.
- Beginning of the Year – assets $ 85,000, Total liabilities $62,000, Total owner’s equity?
- End of Year – assets $110,000, Total owner’s equity $60,000, Total liabilities?
- Changes during the year in the owner’s equity – Investments by owner? Drawings $18,000,Total revenues $175,000, Total expenses $140,000.
1) Beginning of Year
Therefore, the calculation of total owner’s equity using below formula is
- = $85,000-$62,000
- Total Owner’s Equity=$23,000
2) End of Year
Therefore, the calculation of total liabilities using below formula is
4.9 (1,067 ratings)
- Total Liabilities=$110,000-$60,000
- Total Liabilities=$50,000
3) Changes during the Year in Owner’s Equity
Opening Balance $23,000, Investments by owner?, Drawings -$18,000,Total revenues +$175,000, Total expenses -$140,000, Closing Balance $60,000.
Therefore, the calculation of owner’s investment using below formula is
Closing Balance = Opening Balance + Owner’s Investments – Drawings + Revenues – Expenses
- $60,000=$23,000+ Owner’s Investments-$18,000+$175,000-$140,000
- Owner’s Investments=$20,000
A co. owner’s equity is 1/3 of its total assets. Its liabilities $200,000.What is the total assets?
- Owner’s Equity = 1/3*Assets=1/3 *A
- Total Assets Formula = Owner’s Equity+ Liabilities
- A= 1/3 *A+$200,000
- A- 1/3*A = $200,000
- 2/3*A = $200,000
- A= $100,000*3
- A = $300,000
Preparing a Balance Sheet
Now, let us have a look at some of its advantages
- It can be used at any time to repay liabilities.
- Current Assets, on one hand, can be easily converted for liquid cash whereas on the other hand Long Term Assets can be used as a mortgage to support working capital.
- Assets help in improving the valuation of the firm. More Assets, fewer liabilities mean more valuable firm.
- Accounts Receivables are another important part of Assets which helps in building good relationships with various clients, which allows clients to purchase on credit and pay later.
- Various business deals like Mergers and Acquisitions, Tie-ups, etc. assets play a vital role, as every decision is taken by considering the firm’s assets.
- Leasing or renting assets such as machinery or office equipment can save you the initial costs of buying them outright.
Now, let us have a look at some its disadvantages
- Depreciation in Value of Fixed Assets over the years.
- One can’t claim capital allowances on a leased asset if the lease period is less than 5 years
- In the case of non-repayment of liabilities, the mortgaged asset can be auctioned by the bank in order to collect the loan amount.
- Sometimes assets become non- performing assets and maintenance or written-off of such assets cost more to firms.
Applications of Total Assets
#1 – Net Assets – This is a difference between Total Assets and Total Liabilities.
#2 – ROTA – Return on Total Assets is calculated as the ratio of Net income to the total value of its assets.
#3 – RONA – Return on Net Assets is calculated as
#4 – Asset Turnover Ratio – This is an activity ratio, which is calculated as:-
#5 – DuPont Analysis – Asset Turnover ratio is used to perform DuPont Analysis.
DuPont analysis is a useful method used to decompose the various drivers of return on equity (ROE). Fragmentation of ROE allows investors to focus on the key metrics of financial performance individually to identify strengths and weaknesses. These metrics of financial performance are:-
- Operating Efficiency – It is represented by Profit Margin.
- Asset Use Efficiency -It is represented by Asset Turnover Ratio.
- Financial Leverage -It is represented as Equity Multiplier.
Asset plays a significant role in the vast study of the financial world. Individuals or Entities should hold more Assets and fewer liabilities in order to improve their market value and their sustainability for the future. In order to get more projects in future, the company should look healthy and a firm’s health will be decided on various parameters among which “Asset” is the most crucial one, as it will help in predicting the range of profit firm can earn on their current investment over the period of time.
This has been a guide to what is Total Assets and its definition. Here we discuss the types of total assets along with its formula and calculation examples. You can learn more about accounting from the following articles –