What is the Total Assets Formula?
Formula for Total Assets
Total assets formula can be defined as:
Total Assets Calculation
Assets are anything that the company owns, has economic value, and can be converted to cash.
Current assets are assets which are expected to be converted to cash within one financial year, while non-current assets are held by a company for more than one year, and are not readily convertible into cash.
Liquidity of Assets
How quickly an asset can be converted to cash or a cash equivalent is a term called liquidity.
The most liquid asset is cash itself, while non-liquid assets include things such as real estate, machinery, or land, because they cannot be converted quickly to cash.
Total Assets on a Balance Sheet
Total assets from a company are typically presented on a balance sheet, where the total assets must be equal to the sum of total liabilities and stockholders’ equity combined.
The liabilities and shareholders’ equity show how the assets of a company are financed.
Total Assets Meaning
This accounting equation ensures that a company’s balance sheet remains balanced, and is the foundation for the “double entry system”in accounting.