What Are Net Assets & How To Calculate Net Assets From The Balance Sheet
What Are Net Assets
Net assets are the residual value of an entity’s assets after deducting all the company’s debts. Net assets are also known as owner’s or shareholder’s equity.
In short, net assets are the remaining value or worth of a company after paying its all liabilities. In the word “net assets” “net” represents the net value after deducting the debts from the company’s total assets while the assets represent the economic resources that are controlled by an entity. This means net assets show the net value of an entity’s economic resources that are remained after deducting all the company’s debts.
How To Calculate Net Assets From Balance Sheet
Net assets are calculated as:
Net Assets= Total Assets – Total Liabilities
Total Assets= (Total Current Assets plus Total Non-Current Assets)
Total Liabilities= (Total Current Liabilities plus Total Non-Current Liabilities)
Example
Albert and William were two partners, they handled a business that had total assets of $100,000 and current liabilities of $1,000, and long-term debts were $20,000.
Calculate the net assets.
The formula for calculating net assets is (total assets minus total liabilities), as in the question the value of the total assets is already given, now we have the calculate the total liabilities that can be calculated as (Current plus Non-Current Liabilities), $1,000 plus $20,000= $21,000
Net Assets= $100,000 – $21,000= $79,000
FAQs
Where do you find the net assets on the balance sheet?
Add all the assets (current and non-current assets) and minus them from the total liabilities (current and non-current liabilities), and you will get the net assets value.
Are net assets the same as total assets?
No, these both are different as net assets show the net value of an entity after deducting all the debts while the total assets are the sum of the current and non-current assets.
Are cash, land, building, equipment, and inventory examples of net assets?
These assets are part of net assets, as we get the net asset value when we add all the assets of the company and deduct debts from it.