If your financial reports include the term depreciation, you are almost certainly on accrual accounting. Even though many board members would like to rename this cruel accounting because of its complexity, it is really the best representation of your organization s financial history. These are things you possess, own, or are owed. Your organization s assets are shown on your balance sheet. Assets such as buildings, equipment and vehicles are usually shown with their accumulated depreciation subtracted, giving a net value.
Assets come in current and fixed varieties.
A current asset is one that can be quickly and easily turned into cash within the coming reporting period. Thus cash, securities that can be sold quickly, and collectable receivables would be current, while buildings, multi-year CD s and large equipment would be considered fixed. This is fine, but not very liquid if you have a short-term cash need. Balance sheets do give you a status of your organization s financial condition, but they do not tell you whether you are ahead of, or behind, your budget. To make the reading and understanding of balance sheets easier, I recommend the use of financial ratios.