Page 7 - CBS Client Handbook

Although these things might not seem like they provide any economic benefit upon first consideration,
business owners can reap monetary rewards from their use. For instance, a company’s trademark or
brand can aid in the market and sale of its products. If you’ve ever bought an item strictly because of its
brand, that company converted its intangible asset — its brand — into sales revenue.

Operating assets - ​These assets are those that are required for a business to complete its day-to-day
functions. In other words, these are things that a company uses to produce its product or service and can
include fixed and current assets, as well as tangible and intangible assets. Some of the most common
items included in this category are cash, a company’s bank balance, ​inventory​, and operating machinery.

Non-operating assets - ​Finally, non-operating assets are those that are not critical for a company to
provide its product or service, but which are nevertheless essential to establish and run a business. For
example, many intangible assets fall into this category, such as brands, trademarks, and patents.

Liabilities

Liabilities - ​If assets are the resources your company owns that contribute to its economic value,
liabilities are its exact opposite. In fact, liabilities are just that — things your company is responsible for by
law, especially ​debts​ or financial obligations. For example, any debt accrued by a business in the course
of starting, growing, and maintaining its operations is a liability. This could include bank loans, credit card
debts, and monies owed to vendors and product manufacturers. Liabilities, like assets, can be divided into
subcategories. The two primary types of liabilities are often referred to as current liabilities and
non-current liabilities.

Current liabilities​ - ​This type of liability refers to immediate debts that must be repaid within one year.
For example, money owed to suppliers or vendors would be a current liability.

Non-current liabilities ​- ​Also referred to as long-term liabilities, this category encompasses debts or
obligations that your company must repay in over a year’s time. For example, non-current liabilities would
include things like business loans, deferred tax liabilities, mortgages, and leases.

Balance sheet

Bringing the two above terms together, we arrive at your company’s ​balance sheet​. This document
subtracts your company’s total liabilities from its total assets in order to arrive at your company’s net
worth.

Again, assets would include the current and fixed assets your company has on hand. Meanwhile, liabilities
would include outstanding debts or obligations. By subtracting what you owe from what you own, you can
determine your company’s net worth, and arrive at a comprehensive snapshot of the company’s financial
situation at a given moment.

Expenses - ​According to ​Section 162​ of the Internal Revenue Code (IRC), business expenses are any cost
that is “ordinary and necessary” to run a business or trade. These expenses are the costs your company
incurs each month in order to operate, and include things like rent, utilities, legal costs, employee salaries,

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