Definition of Assets List
An asset is a resource that is meant for the inflow of economic benefits in the entity that owns and controls it. Different kinds of assets are recorded in the asset side of the balance sheet under the sub-headings like non-current assets, current assets, etc. The list of assets details different types of assets owned by the entity, for example, operating assets, non-operating assets, current assets, non-current assets, tangible, and intangible assets.
Explanation
When an entity being an individual, corporation or government owns or controls an asset, they do it with the expectation of inflow of economic benefit from it in the form of improved sales, reduced expenses, or other forms of cash flow. Assets are generally recorded on the balance sheet on a historical cost basis. Depending on the accounting policies followed by the entity the assets can be revalued based on the fair market value.
In the list of assets, assets are classified according to their usage, purpose, and liquidity i.e. their ability to be converted into a liquid asset. The assets that can be easily converted into cash are classified as current assets, while long-term assets that cannot be easily converted into cash are classified into non-current assets.
List of Assets
The following are the components of the list of assets detailing main assets on the balance sheet. When assets are classified based on their liquidity:
1. Current Assets
- Cash and Cash Equivalents: Cash represent cash in hand and cash equivalents represent securities that can be easily converted in to cash generally in 3 months. Cash and cash equivalents are part of the current assets of the company and are used to purchase other fixed assets, for paying wages and salaries and meeting out day to day operating expenses.
- Short-term Investments: Investments that are going to mature within a year are classified here. These can be debt as well as equity-based investments.
- Inventory: Inventory is the value of the goods that are lying in the stock of the company. It falls under the current asset heading and is further classified as raw material, work-in-progress, and finished goods.
- Accounts Receivable: This represents cash receivable from debtors for goods sold or services rendered on a credit basis.
- Prepaid Expenses: These represent the expenses paid in advance which represents a situation wherein services and goods are not yet received but the consideration is paid for by the business.
2. Non-Current Assets
- Landand Building: The entity owning the land or building may be using it for office premises, warehousing, renting, or other purposes. The same is shown at its cost in the balance sheet, after accounting for depreciation in the case of building.
- Property, Plant, and Equipment (PPE): These are part of fixed assets in the balance sheet and are tangible or physical in nature. They are held by the business for more than one accounting year, and are, therefore, classified under the category of long-term assets. They include plant, machinery, furniture and fixtures, vehicles, etc. They are shown at cost less depreciation in the balance sheet.
- Intangible Assets: Intangible assets are those which do not have any physical being but they have economic value, for example, goodwill, patent, copyrights, trademark, etc. Goodwill being one of the most important intangible assets is recognized when one company acquires or amalgamates with another company.
- Long-term Investments: Long-term investments as the name suggests are held by the business for more than a year and are shown under non-current assets in the balance sheet.
3. When Classified based on purpose or usage
- Operating Assets: Those assets which help in day to day operation of the business are called an operating asset. They include cash, stock, building, warehouse, machinery, equipment, plants, etc.
- Non-operating Assets: They are useful for day to day business but they do generate revenue over the business’s life. Non- operating assets include short term investment, marketable securities, land, accrued income, and so on.
Conclusion
A list of assets classifies an entity’s assets under different heads according to their characteristics and usage in the business. Classification of assets is important because it helps the users in identifying which assets are forming part of working capital, which are generating revenue, and which are giving the long term benefit to the business.
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