What is net account value? Simple classification and calculation

Net account value is an important concept in finance and investing. But not everyone knows what net worth is and what it means? In this article, let's learn about net account value, classification, and simple calculation with 1C Vietnam.

1. What is net assets?

Net assets are the assets of an entity after deducting all outstanding liabilities. Includes financial and non-financial assets such as cash, real estate, equipment, etc. Liabilities include both short-term and long-term debt.

Different entities such as businesses, governments, and individuals have their own ways of calculating net worth.

• For businesses, net asset value often appears in the "Equity" section on the financial statements.
• For the government, net asset value represents financial potential and the ability to balance revenue and expenditure sources.
• As for individuals, the calculation of net assets is similar to other subjects.

2. How to calculate net asset value

After learning what net asset value is, 1C Vietnam will share how to calculate net fixed assets. The following simple formula:

Net asset value = Total assets – Total liabilities.

In there:

Total assets include a variety of assets including:

• Current assets: Includes cash, bank deposits, certificates of deposit and other equivalent amounts of money.
• Real estate: Housing, investment real estate, business premises, many other types of assets.
• Personal assets: Includes furniture, jewelry, cars, motorbikes and assets that do not have high value when sold.
• Personal loans: Includes all loans from friends or business associates that are recoverable.
• Retirement investments: Includes social insurance and retirement investments.
• Other assets: Includes refunds from life insurance, interest from loans and other compensation.

Total liabilities include:

• Installment loan: To buy a house, car, or other products.
• Mortgage Loan: Related to buying a house, car or investment.
• Business Loans: Personal loans that are still related to business operations.
• Personal loan: From relatives, friends or business partners.
• Credit card debt: This is the amount of money the unit has used from the credit card and must return to the bank or credit institution. This debt needs to be monitored regularly to avoid high debt balance and affecting your credit score.

Closely monitoring and calculating changes in net assets helps make important decisions about your financial situation, avoiding debt from growing out of control.

3. Classification of net assets in the enterprise

Classifying net assets helps manage and control finances effectively, thereby creating long-term benefits for owners. In businesses, net assets are divided into two important categories, based on the specific period of use:

Short-term assets : These are assets with a useful life of less than 1 year or according to a specific cycle in the business. The NAV of short-term assets is often volatile and relatively low in value. This asset includes cash, short-term investments, short-term receivables, inventory, and other deposits.

Long-term assets : Usually have a useful life of more than 12 months or many business cycles. The value is often large and fluctuates little during operation. Long-term assets may include:

• Fixed assets : Have great value and are depreciated during use. Fixed assets can be tangible assets such as buildings, land, machinery, manufacturing plants or intangible assets such as copyrights, business or mining licenses, certificates and many others.
• Long-term financial investment : Including joint investments, long-term loans, joint venture capital contributions and other forms of investment.
• Real estate : Includes business investments in real estate to generate profits.
• Long-term receivables : Usually assets appropriated by parties with a holding period of more than 1 year.
• Other forms of assets : Types of assets such as long-term deposits, prepaid expenses and many others are included in the long-term asset portfolio of a business.

4. Meaning of net assets for businesses

Below is the important meaning of net assets for businesses:

• Measuring financial value: Net assets accurately reflect the current financial value of individuals, organizations, businesses, governments and countries.
• Track progress: With precision, net worth allows tracking financial fluctuations over time.
• Balance income and expenditure: Helps balance income and expenses more specifically than just considering income.
• Business loan documents: In business activities, net assets play an important role in evaluating loan documents and deciding on loan approval.
• Financial growth tool: Net worth is the most important measure of an individual or organization's assets, allowing for financial growth without relying solely on income from employment.

Thus, 1C Vietnam has presented in detail the concept of net assets, as well as simple classification and calculation of net asset value. Hopefully, through this knowledge, businesses can evaluate their finances in an overview, consider decisions about investment and borrowing, and create a strong and sustainable financial situation.