English
Assets
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. (1)Simply state, assets represents value of ownership that can be converte into cash (although cash itself is also considered an asset).
(2)The balance sheet of a firm records the monetary value of the assets own by the firm. It is money and other valuables belonging to an individual or business. Two major asset classes are tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Current assets include inventory, while fixed assets include such items as buildings and equipment
Intangible assets are nonphysical resources and rights that have a value to the firm because they give the firm some kind of advantage in the market place. Examples of intangible assets are goodwill, copyrights, trademarks, patents and computer programs, and financial assets, including such items as accounts receivable, bonds and stocks.
An asset is a resource controlled by the entity as a result of past events or transactions and from which future economic benefits are expected to flow to the entity (Framework Par 49a).
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 relates assets, liabilities, and owner's equity:
Assets = Liabilities + Stockholder's Equity (Owner's Equity)
Assets = Liabilities + Capital
Liabilities = Assets - Capital
Capital = Assets - liabilities
That is, the total value of a firms. (3)Assets are always equals to the combined value of its "equity" and "liabilities." The accounting equation is the mathematical structure of the balance sheet.`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. (3)Assets can be divides 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.
Classification of assets :
11. Current Assets
These are always the first thing on the Balance Sheet and there’s a reason for that. (Come on, you knew we had to have a reason, didn’t you?) The reason Current Assets are first is because they are what we like to call the most “liquid”. 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. There are 5 major items included into current assets :
a. 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).
b. Short-term investments
Include securities bought and held for sale in the near future to generate income on short-term price differences (trading securities).
c. Receivables
Usually reported as net of allowance for noncollectable accounts.
d. Inventory
Trading these assets is a normal business of a company.(4)The inventory value reports on the balance sheet usually the historical cost or fair market value, whichever is lower. This is known as the "lower of cost or market" rule.
e. Prepaid expenses
These are expenses paid in cash and recorded as assets before they are used or consumed (a common example is insurance). See also adjusting entries. (5)Marketable securities that can be converts into cash quickly at a reasonable price. (6)The phrase net current assets (also called working capital) is often used and refers to the total of current assets less the total of currentliabilities.
2. Fixed assets
Also referred to as PPE (property, plant, and equipment),(7)these are purchases for continue and long-term use in earning profit in a business. This group includes as an asset land, buildings, machinery, furniture, tools, IT equipment, e.g., laptops, and certain wasting resources e.g., timberland and minerals.(8)They are usually writes off against profits over their anticipate life by charging depreciation expenses (with exception of land assets).(9)Accumulate depreciation is shows in the face of the balance sheet or in the notes. Asset is important factor in balance sheet. These are also called capital assets in management accounting.
a. Intangible Assets
(10)Intangible assets lack of physical substance and usually are very hard to evaluates. 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.Websites are treated differently in different countries and may fall under either tangible or intangible assets.
Tangible assets are those that have a physical substance, such as currencies, buildings, real estate, vehicles, inventories, equipment, and precious metals.
c. Financial Assets
A financial asset should be a long-term claim. It could, forexample, be a claim with a due date longer than a year. Claimsshorter than 1 year should be current assets.
A financial asset can be:
• Shares, shares in group
• Receivables from a group of a company
• Shares, shares in associated companies
• Receivables from associated companies
• Other long-term securities holdings
• Loan to shareholders and relations
• Other long-term receivables
Liability
In financial accounting, a liability is defined as an obligation of an entity arising from pasttransactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future. A liability is defined by the following characteristics :
· Any type of borrowing from persons or banks for improving a business or personal income that is payable during short or long time;
· A duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services, or other transaction yielding an economic benefit, at a specified or determinable date, on occurrence of a specified event, or on demand;
· A duty or responsibility that obligates the entity to another, leaving it little or no discretion to avoid settlement; and,
· A transaction or event obligating the entity that has already occurred.
Liabilities in financial accounting need not be legally enforceable; but can be based on equitable obligations or constructive obligations. An equitable obligation is a duty based on ethical or moral considerations. A constructive obligation is an obligation that is implied by a set of circumstances in a particular situation, as opposed to a contractually based obligation.
The accounting equation relates assets, liabilities, and owner's equity:
The accounting equation is the mathematical structure of the balance sheet.
The Bangladesi Accounting Research Foundation defines liabilities as: "future sacrifice of economic benefits that the entity is presently obliged to make to other entities as a result of past transactions and other past events." Probably the most accepted accounting definition of liability is the one used by theInternational Accounting Standards Board (IASB). The following is a quotation from IFRS Framework.
A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. Regulations as to the recognition of liabilities are different all over the world, but are roughly similar to those of the IASB. Examples of types of liabilities include: money owing on a loan, money owing on a mortgage, or an IOU.
Liabilites of sectors of USA economy, 1945-2009, based on flow of funds statistics of theFederal Reserve System.Liabilities are debts and obligations of the business they represent as creditor's claim on business assets.
All kinds of payable :
1. Notes payable - a written promise.
2. Accounts Payable - an oral promise.
3. Interests Payable.
4. Sales Payable.
5. Salaries payable
6. Unclaimed dividend
7. Long/short term loans
Clasification of accounting liabilities :
1. Long-term Liabilities
Are liabilities with a future benefit over one year, such as notes payable that mature longer than one year. In accounting, the long-term liabilities are shown on the right wing of the balance-sheet representing the sources of funds, which are generally bounded in form of capital assets.
Examples of long-term liabilities are debentures, mortgage loans and other bank loans. (Note: Not all bank loans are long term as not all are paid over a period greater than a year, an example of this is a bridging loan.)
By convention, the portion of long-term liabilities that must be paid in the coming 12-month period are classified as current liabilities. For example, a loan for which two payments of $1000 are due, one in the next twelve months and the other after that date, would be 'split' into two: the first $1000 would be classified as a current liability, and the second $1000 as a long-term liability (note this example is simplified, and does not take into account any interest or discounting effects, which may be required depending on the accounting rules.
2. Current/Short Liabilities
Everyone can probably agree that more cash in the pocket is a good thing. Current liabilities are bills that must be paid using cash, services, or by securing a loan. However, by delaying the payments as long as possible, businesses ensure that there is more cash in their pockets today. These liabilities are reasonably expected to be liquidated within a year. They usually include payables such aswages, accounts, taxes, and accounts payables, unearned revenue when adjusting entries, portions of long-term bonds to be paid this year, short-term obligations (e.g. from purchase of equipment).
Liabilities are debts owed by a business to other parties. In accounting, the liabilities will be shown on the balance sheet. Debts that are due within one fiscal year or during the annual operating cycle of the business are called current liabilities. These are debts that will be paid using current assets or by securing new financing. Examples are notes payable, long-term debts payable, accrued expenses and accounts payable.
Short Term Notes Payable and Current Long Term Debt
Notes payable, which includes written short term obligations and long term current debts, are listed under current liabilities on the balance sheet. These notes payable and long term debts payable are those loan expenses with or without interest payments due within the year. Long term debts are not actually liabilities from the current year, but those portions of the payments that are due with the fiscal year are shown on this part of the balance sheet. Most balance sheets will show the due date of the debt and the interest rate in a footnote.
Accounts Payable and Accrued Expenses
Sometimes viewed as interest-free short term financing, accrued expenses and accounts payable are bills that have not yet been paid. Accounts payable is money owed to suppliers for those products or services received but not paid for immediately. Accrued expenses are wages, taxes and interest that have not yet been paid and add up on the balance sheet until they are due. A business can increase their available current assets by delaying the expense of accounts payable and not paying their debts until the final due date.
Payment with Current Assets
Payment of debts typically involves using current assets, creating another liability, or providing a service. The opposite of current liabilities, current assets are the value of those assets that can be converted into cash within the year. Current assets include accounts receivable, inventory, short-term investments, and cash. These liquid assets are used to pay the liabilities, or another liability such as a bank loan could be acquired to pay the current debt.
Current Ratio
Dividing total current assets by the total current liabilities provides the current ratio. This ratio represents the liquidity of the business, or its ability to repay the liabilities using current assets. A ratio of less than one suggests that the business is low on cash, but this does not necessarily mean that the company is in financial trouble as financing can often be secured to pay debts. However the current ratio can show how quickly a business is getting paid for selling their goods, which can differ widely across industries.
Current liabilities may appear to be negative for a business, bills and payments due with the year that have not yet been paid. However, these liabilities can be seen as a free loan, due until paid, keeping the almighty cash in hand as long as possible.
Simple Present
1. (+) Simply state, assets represents value of ownership that can be convert into cash.
(-) Simply state, assets represent value of ownership that can’t be convert into cash.
(?) Does in simply stated assets represent value of ownership can be converte into cash?
2. (+) The balance sheet of a firm records the monetary value of the assets own by the firm.
(-) The balance sheet of a firm does not record the monetary value of the assets own by the firm.
(?) Does the balance sheet of a firm record the monetary value of the assets own by the firm?
3. (+) Assets can be divides into current assets and fixed assets.
(-) Assets can’t be divide into current assets and fixed assets.
(?) Does assets can be divide into current assets and fixed assets?
4. (+) The inventory value reports on the balance sheet that usually the historical cost or fair market value, whichever lower..
(-) The inventory value does’nt report on the balance sheet that usually the historical cost or fair market value, whichever lower.
(?) Does the inventory value report on the balance sheet that usually the historical cost or fair market value whichever lower?
5. (+) Marketable securities that can be converts into cash quickly at a reasonable price.
(-) Marketable securities that can’t be convert into cash quickly at a reasonable price.
(?) Does marketable securities can be convert into cash quickly at a reasonable price?
6. (+) The phrase net current assets is often use and refers to the total of current assets less the total of currentliabilities.
(-) The phrase net current assets doesn’t often use and refer to the total of current assets less the total of currentliabilities.
(?) Does the phrase net current assets often use and refer to the total of current assets less the total of currentliabilities?
7. (+) These are purchases for continue and long-term use in earning profit in a business.
(-) These doesn’t purchase for continue and long-term use in earning profit in a business.
(?) Does these purchase for continue and long-term use in earning profit in a business?
8. (+) They are usually writes off against profits over their anticipate life by charging depreciation expenses.
(-) They don’t write off against profit over their ancipate life by charging depreciation expenses.
(?) Do they write off against profit over their ancipate life by charging depreciation expenses.
9. (+) Accumulate depreciation is shows in the face of the balance sheet or in the notes.
(-) Accumulate depreciation doesn’t show in the face balance sheet or in the notes.
(?) Does accumulated depreciation show in the face balance sheet or in the notes?
10. (+) Intangible assets lack of physical substance and usually are very hard to evaluates.
(-) Intagible assets doesn’t lack of physical substance and usually very hard to evaluate.
(?) Does intangible assets lack of physical substance and usually very hard to evaluate?
.jpg){kind=link}
