Assets are everything what company owns and uses or needs for production process or

business activity. Liabilities are everything what company owes. Are sources from which the
company is financed. Assets must be equal to liabilities.
Division of assets:
− Material (tangible) eg. buildings, land, cars
− Immaterial (intangible) eg. cash, licences, copy-right, software
− Financial eg. shares, loans
2) According to the length of using assets in the company
− Long term/fixed/investment assets :
a) active form – assets that are actively used for
production e.g. machinary, computers...
b) passive form – assets that a company does not
use directly for the production but needs them for the
production process e.g. furniture, buildings...
− Short term/current/circulatory assets - they stay in the company for less
than one year, they circulate and change their form. Eg. cash or accounts in
a bank, accounts receivable – are the sums owed to the company by its
There are 3 criteria for the division between long term and short term assets:
1) purpose of usage (ucel pouzitia) – e.g. if a company buys a car to
use it for the prodcuction process – it is fixed assets, but if
a company buys a car with aimt to sell it for profit – it is
circulatory asset
2) time of usage – assets that should be used in a company less
than one year are current assets and more than one year are
fixed assets
3) value of an asset
× For material assets - if it has the value more than 30 000,- Sk = fixed
× For immaterial assets - if it has the value more than 50 000,- Sk = fixed
asset, less than 50 000,- Sk = current asset
Current assets are sometimes called circulatory assets because they circulate in the
company and change their form:
Raw material
^ -
Final products
Complex division of assets
1) Fixed
a) Fixed material assets eg. buildings, land, furniture, cars, machinery, commodities. etc.
b) Fixed immaterial assets eg. software, licence, know-how, brand, patents
c) Fixed financial assets
i) long-term securities bought (dlhodobe cenne papiery) eg. bonds - if
the maturity is more than one year
ii) long-term accounts receivable (dlhodobe pohladavky – niekomu
som pozical) - maturity is more than one year and it is if firms lend money to
2) Current
a) Inventories (zasoby)
i) raw material
ii) semi-finished products
iii) final products – produced by a company itself
iv) goods – bought from other company to be sold again
b) Short-term accounts receivable (pohladavky) – e.g. commercial
credit (obchodny uver)
c) Short-term financial assets - short-term securities bought e.g.
treasury bills (the same thing like bonds but the maturity is less than
one year)
d) Money assets
i) cash
ii) on the account
Fixed assets stay in a company for a long-time and they lose their value
– this is called depreciation. There are two types of depreciation:
a) Physical – if they depreciate physically because of corosion, weathering, etc.
b) Moral – losing the value because of new higher technology (though
not worn-out)
The lost value is expressed by the allowances for depreciation (expresses the lost value of
assets), which have three functions:
a) they represent the lost value which is gradually transformed into the
b) they are the part of production cost – they decrease the profit and
a company pays lower tax because it has lower profit. That’s why
depreciation is precisely defined in the Tax law.
c) through the revenues for sold products it comes back to the
company and serves as a source of financing a company
According to the tax law, assets are divided into four depreciation groups:
a) 1
group has the period of depreciation 4 years eg. cars, PC
b) 2
group has the period of depreciation 6 years eg. lorries, machineries
c) 3
group has the period of depreciation 12 years eg. wooden buildings
d) 4
group has the period of depreciation 20 years eg. buildings
Land does not depreciate.
Costs – naklady – it must be divided into x years
Expenses – vydavky – it is paid in one go e.g. cash for buying a car
Methods of calculating depreciation:
a) Straight line method (rovnomerné odpisy ) – you can depreciate each year the
same sum eg. if a car costs 400 000,- Sk and the period of depreciation is 4 years,
every year you can depreciate 100 000,- Sk
b) Diminishing balance method (zrýchlené odpisy) – every year you can
depreciate the other sum eg. the first year you can depreciate 40%, the second year
30%, the third 20 % and the fourth year 10% = 100%
An enterpreneur can choose the method of depreciation but he can´t change it during the
depreciation period.
Liabilities are everything what company owes, financial revenues. Division of liabilities:
a) Own capital (vlastný kapitál)
- Initial capital (shares,deposits)
- Retained profit from previous periods (nerozdelený zisk)
- Profit from current period
b) Creditors (cudz í kapitál /loans)
- Long term loans – their maturity (splatnosť) is more than one year
o mortgage - a loan secured by real estate
o bonds – corporations issue their bonds – IOU papers
- Short-term loans:
o trade credit – if the business partner allows you to pay at a later date
o loans from finantial institutions – treasury bills
o loans from investors – IOU (I Owe You) papers – bonds with the
durability less than one year
Sources of financing the business
o internal
º profits
º depreciation
º others (from sales of assets of the company)
o external
º deposits of the owners, shares and other securities
º loans (credits)
º donations – subsidies
o one year
Statements showing the states and the results of the company
• part of an annual report and it must be open to public by joint-
stock companies
• annual report consists of three documents:
1. balance sheet ( súvaha, výkaz majetku) – a financial statement that
summarizes a company's assets, liabilities and shareholders' equity usually
prepared at the end of an accounting year.
∑Assets = ∑Liabilities
2. profit and loss statement (výkaz ziskov a strát) – shows how a company was
successful to make profit, usually prepared at the end of an accounting year
costs revenues
Material Sales(tržby
For depreciation
∑ costs ∑ revenues
7 + profit
× - loss
3. cash flow statement (tok hotovosti) – shows the cash-flow during the year, it
helps to prepare to forecast the future expenses and revenues because sometimes in
the company the sales boom, sometimes they are slow but the company has fixed
costs so managers are prepared to have some money aside to finance the deficit
• these three balance sheet segments give investors an idea as to what the
company owns and owes, as well as the amount invested by the shareholders
• these statements are part of an annual report
Cash from previous period + revenues - costs = cash on hand in
the current year

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