For example inventory is on the balance sheet until it becomes cost of goods sold. Further, when income is recognized for the year, it is closed off the income statement and put on the balance sheet as equity. LO4.5 Give four major categories of assets. Four categories are current assets, long-term investments, fixed assets, and other assets. Describe accumulated depreciation and explain how it works.
Accumulated depreciation is a contra account.
It offsets the historical cost of the asset to reflect the accumulated amount of expense transferred to the income statement. LO4.7 Define goodwill. Goodwill is the excess of the price paid for a firm over the fair market value of the assets. It is an intangible asset and is periodically amortized on the income statement. LO4.8 Explain why accounts payable are called spontaneous liabilities.