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Assets is a property or legal rights owned by a business to which money value can be attached.
Anything which will enable the firm to get cash or a benefit in the future, is an asset. Examples of assets are land, building, machinery, furniture, stock, debtors, cash and bank balance, etc.
CHARACTERISTICS
It should be owned (i.e. property) by the business. It may be in the tangible (physical) form or intangible form. It should have some value attached to it. It should be capable of being measured in money terms.
ASSETS IN ACCOUNTING
In the financial accounting sense of the term, it is not necessary to be able to legally enforce the asset's benefit for qualifying a resource as being an asset, provided the entity can control its use by other means. The accounting equation is the mathematical structure of the balance sheet. It relates assets, liabilities, and owner's equity: Assets = Liabilities + Capital That is, the total value of a firms Assets are always equal to the combined value of its "equity" and "liabilities.
Assets are listed on the balance sheet. In a company's balance sheet certain divisions are required by generally accepted accounting principles (GAAP), which vary from country to country. Assets can be divided into e.g. current assets and fixed assets, often with further subdivisions such as cash, receivables and inventory. Assets are formally controlled and managed within larger organizations via the use of asset tracking tools. These monitor the purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non-physical assets.
CURRENT ASSETS
Current assets are cash and other assets expected to be converted to cash or consumed either in a year or in the operating cycle (whichever is longer), without disturbing the normal operations of a business. These assets are continually turned over in the course of a business during normal business activity.
CASH AND CASH EQUIVALENTS it is the most liquid asset, which includes currency, deposit accounts, and negotiable instruments (e.g., money orders, cheque, bank drafts). SHORT-TERM INVESTMENTS include securities bought and held for sale in the near future to generate income on short-term price differences (trading securities).
INVENTORY trading these assets is a normal business of a company. The inventory value reported on the balance sheet is usually the historical cost or fair market value, whichever is lower. This is known as the "lower of cost or market" rule.
PREPAID EXPENSES these are expenses paid in cash and recorded as assets before they are used or consumed (common examples are insurance or office supplies). See also adjusting entries.
Investments in fixed assets not used in operations (e.g., land held for sale).
Investments in special funds (e.g. sinking funds or pension funds).
FIXED ASSETS
Also referred to as PPE (property, plant, and equipment), these are purchased for continued and long-term use in earning profit in a business. This group includes as an asset land, building, machinery, furniture, tools, IT equipment, e.g., laptops, and certain wasting resources e.g., timberland and minerals. They are written off against profits over their anticipated life by charging depreciation expenses (with exception of land assets).
INTANGIBLE ASSET
Intangible assets lack of physical substance and usually are very hard to evaluate.
They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc.
These assets are (according to US GAAP) amortized to expense over 5 to 40 years with the exception of goodwill.
TANGIBLE ASSET
Tangible assets are those assets which have a physical existence, i.e. they can be seen and touched.
Examples of Tangible Assets are land, machinery, computer, furniture, goods, currencies, buildings, real estate, vehicles, inventories, equipment, and precious metals.
FICTITIOUS ASSETS
Fictitious Assets are those which are neither tangible assets nor intangible assets. They are losses written off not In the year in which they are incurred but in more than one accounting period. In case of firms, Fictitious Assets is Deferred Revenue Expenditure. In the case of companies, Discount on Issue of Shares, and Loss on Issue of Debentures.
COMPARISON
CURRENT ASSETS
Stocks Prepaid expenses Debtors Bills Receivable Cash in Hand
LIQUID ASSETS
Debtors
Bills Receivable Cash in Hand Cash in Bank Accrued Incomes Loans and Advances (Short Term)
Cash in Bank
Accrued Incomes Loans and Advances (Short Term) Trade Investments (Short Term)
COMPARISON
CURRENT ASSETS
Stocks Prepaid expenses Debtors Bills Receivable
Cash in Hand
Cash in Bank Accrued Incomes
Cash in Hand
Cash in Bank Accrued Incomes