Agribusiness Library

1. Agribusiness Library Lesson L060086: Assets and Liabilities

2. Objectives 1. 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.

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

4. 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

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

6. What are current assets and what are some examples of current assets? • 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.

7. What are current assets and what are some examples of current assets? • 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.

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

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

10. What are current liabilities and what are some examples of current liabilities? • 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.

11. What are current liabilities and what are some examples of current liabilities? • 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.

12. What are current liabilities and what are some examples of current liabilities? • 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.

13. What are non-current (or long-term) liabilities and what are someexamples of non-current liabilities? • 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.

14. 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?

15. 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?