What is a Long Term and Short Term Asset or Liability Account How are they classified?

As many of us know, accounting is the language of business. That is why this tool is indispensable for the proper functioning of a company. Thus, based on this need, is how the career of business administration arises.

These professionals have the necessary skills to be able to take advantage of financial accounting and perform their functions, promoting the development of the company.

In the same way, it is capable of developing corporate strategies that are adapt to the needs of companies and achieve your goals.

Now, this area of ​​study covers a lot of concepts that are keys to understanding. Among the main ones that we can find we have the concept of assets and liabilities. These form the backbone of modern accounting.

In this article We will explain what assets and liabilities are about. In addition to the classification that each of them has.

What is a short-term and long-term asset account?

Asset accounts are all those goods and services owned by a company. However, they are limited under implementation to exercise a particular productive activity.

This means that the assets of a company refer only to the goods and services that are part of the production system of a company. This definition also includes accounts receivable and those accounts that generate a contribution in the future.

man checks bills

Similarly, assets are one of the three elements that make up the balance sheet equation. The most important in accounting.

The main way to categorize the assets of a company is in two categories, these are raised in asset lifetime function within the productive system managed by the company. These categories are long-term assets and short-term assets.

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Long-term assets

They are all those goods and services that the company has and whose duration is older than one year. In other words, once the one-year period has ended, the asset continues to be involved in the company’s processes.

Therefore it is still useful, without the need for the company to sell it. So within this category we can find:

  • Patents
  • Licensing
  • Buildings
  • Machinery
  • Processes
  • software
  • Land
  • vehicles
  • Long-term financial investments

Short-term assets

They are all goods and services whose duration within the company’s processes it is less than one year. These goods are in constant circulation. Well, this is how the company can obtain benefits from these.

The objective of the assets in the short term is for the company to sell them in order to take advantage of your sale. Some short-term assets are:

  • Short-term investments
  • Commodity
  • Customers or subscribers
  • Small boxes

What is a long-term and short-term liability account?

Liabilities are all the debts and obligations that a company owns. Like assets, they are only considered liabilities debts and obligations that are involved within the productive apparatus of said company.

man using calculator

In the same sense, liabilities are those charges or obligations to which he must surrender in the future, for actions carried out in the past. Additionally, liabilities are also part of the balance sheet equation.

Liabilities can be classified according to the time available to the company to answer to obligations or debts. Thus, they are classified into short-term liabilities and long-term liabilities.

Short-term liabilities

They are those obligations and debts that must be serviced in a period of less than one year. Therefore, it makes references to annual or monthly obligations that the company may have. As may be the case with public services. In the same way, among these accounts we can find the following:

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  • Wages
  • Income (Of equipment, buildings or facilities)
  • Short term debts
  • Taxes
  • Short-term credits

Long term passives

These are the debts or obligations that the company has to respond to in a period greater than one year. These accounts are also known as fixed liabilities. some long-term liabilities are:

  • Long term debts
  • Bank loans
  • Mortgages
  • Deferred taxes

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