NET ASSETS = Assets -
Assets are anything which the firm
owns or has title to (in other words ownership of).
Examples of Assets are cash, accounts receivable,
investments, equipment, furniture, and buildings.
Liabilities are something which a firm owes to a
person or another firm. It may be in the form of
creditors - people or firms who have sold you goods
and services which you have not yet paid for, or it
may be money borrowed from a financial institution -
loans. Examples of Liabilities are accounts payable,
payroll taxes payable, and loans payable.
FASB Statement of Financial Accounting Concepts
6, Elements of Financial Statements defines Net
assets as "the residual interest in an
entity's assets remaining after liabilities
Type of Net Assets
117 introduced the concept of reporting net assets
in three different classes. Net assets are
classified based on the presence or absence of donor
imposed restriction as either
(1) unrestricted , (2)temporarily restricted, or (3)
Unrestricted Net Assets: are net assets that are
neither temporarily restricted nor permanently
restricted. Therefore, they include all net assets
with uses not restricted by donors or by law.
Temporarily Restricted Net
Assets: are net assets whose use is limited by
either donor-imposed time restrictions or purpose
restrictions. Time restrictions require resources to
be used in a certain period or after a specified
date. Purpose restrictions require resources to be
used for a specified purpose.
Permanently Restricted Net
Assets: are those that the donor stipulates must
be maintained by the organization in perpetuity.
Permanently restricted net assets increase when
organizations receive contributions for which
donor-imposed restrictions limiting the
organization's use of an asset or its economic
benefits neither expire with the passage of time nor
can be removed by the organization's meeting certain