A Balance Sheet

A balance sheet, which is intended to present fairly the financial position of a company, frequently is criticized for not reflecting all assets under the control of a company.

Cite five examples of assets that are not presently included on the balance sheet. Discuss the implications of unrecorded assets for financial statement analysis.

Yes, a balance sheet which is intended to present fairly the financial position of a company, frequently is criticized for not reflecting all assets under the control of a company. And hereby, I have mentioned the five examples of assets which are not presently included on the balance sheet with the discussion of the implications of unrecorded assets for financial statement analysis.

Each and every company’s balance sheet is prepared to know the financial position of the company. Balance sheet always involves with assets and liabilities in the financial statement. And some of the assets which are not recorded in the balance sheet are as follows:

1. Trademark: Trademark is a symbol that determines a company’s product or services and which is completely different from other competitor’s brand. It is also a valuable asset of the company. If the company’s reputation increases positively then it influences in increasing the company’s brand and it stays as it is till the company runs.
2. Goodwill: Goodwill is also another intangible assets of the company. It is a difference between the market value of purchase company and market value of identifiable net assets (Gore & Zimmerman, 2010). The various terms like customer loyalty, image and reputation in market and also good public relation makes good valuation in the market and also it increases market value of the company.
3. Employees: Employees are the basic assets of any organization as they help to run the business in operational activities. As the employees are much dedicated with their best performances, these activities are never recorded in the balance sheet. They are very much important assets but never ever recorded but paid salary according to their performances.
4. Customer: As we have discussed about an employees in an organization, customer is also another intangible assets which are not included in the balance sheet. Every company runs their business as per to fulfill the customer’s needs and demand by satisfying them with the best products and services. So, gaining the good customers means gaining the market value of the company.
5. Patent Right: It means providing license with the permission by the government to the company for a transaction carried out. Here, patent are also not recorded in the balance sheet though all of the associated costs are reported as expenses.

References:

      Gore, R., & Zimmerman, D. (2010). Is Goodwill an Assest? CPA , 46-48.

      Subramanyam, K. (2004). Analyzing Investment Activities. New york: McGraw-Hill.