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Accounting Allah shmoop short term versus long term assets Short

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term assets get listed separately on a balance sheet from

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long term assets They just couldn't play together nicely on

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the playground Short term assets could be things like pre

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paid rent or prepaid insurance or prepaid power gas and

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electric bills Dicey startup companies are often asked to pay

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for things well in advance because war weary landlords have

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too many scars from small companies sneaking off into the

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night and not paying their bills will basically think of

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short term assets as things that can quickly be converted

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into cash or cash itself Yeah cash is a short

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term asset So our two hundred eighty thousand shares of

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Amazon you have in your corporate brokerage account from having

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sold them that patent on electromagnetic remote brain scanners which

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has really helped with their targeted advertising efforts So those

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shares if they were sold are very likely to be

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paid out as accounts receivable due soon like you can

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convert those shares into cash really quickly and the definition

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of soon can vary But generally speaking anything due to

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BP aid to you in the next year is a

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current asset Okay So what about the rent example Well

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think about how pre paid rent could be or should

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be or is an asset right And it could be

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long term and short term right You have a three

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year pre paid rent on a place for three thousand

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bucks a month or thirty six months You were funded

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by venture capitalists and at that time you were swimming

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in cash in order to get into the best building

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in town At a nice discount you had to pay

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all three years of rent in advance That's one hundred

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eight grand at the moment You signed the lease and

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paid the dough You had a short term or current

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asset of thirty six thousand dollars and a long term

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asset of seventy two thousand dollars right Well as the

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first twenty four months went by the value of the

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long term asset gradually declined to zero And then when

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there was one year left on the lease well it

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was only thirty six grand All is a current asset

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Funky things happen in big bull markets with regard to

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rent as well Often if long term rentals happened at

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the bottom of a bad market while the value of

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the real estate goes up a lot as time goes

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by And in theory companies could flip their leases to

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the market which was paying three grand a month when

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they bought in But currently would be happy taking over

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their lease for five grand a month right to grand

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profit among through the company Easy money Well in theory

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companies could note a gain of their current assets But

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since they almost never intend to move out of the

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offices during the time of their least and moving costs

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are usually really high they just leave the numbers as

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they are The big idea here revolves around this one

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year limit thing If you're the one preparing the books

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for your company each period you'll need to assess what

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goes from being a long term asset to being a

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short term one Their lives The thirteen month club You

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know things that are essentially on the on deck circle

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just about ready to be moved from the long term

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Asset column total to the short term one and adjustments

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you know get made If only the members of Congress

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were short term assets instead of long term liabilities but 00:03:08.378 --> [endTime] well what can we do

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