Asset

Submitted by admin on Sun, 11/07/2021 - 15:24

A resource with economic worth that an individual, corporation, or country possesses or controls with the hope of future gain is referred to as an asset.
Assets are bought or developed to raise a company's value or benefit its operations, and they are reported on the balance sheet.
Whether it's manufacturing equipment or a patent, an asset can be looked of as something that can create cash flow, cut expenses, or increase sales in the future.

 

Assets: An Overview


An asset is a financial resource for a corporation or access that other persons or businesses do not have.
A legal right or other access indicates that economic resources can be used at the discretion of a corporation, and their use can be prohibited or regulated by the owner.


A corporation must have a right to an asset as of the date of the financial statements in order for it to be present.
An economic resource is something that is limited in supply and has the power to generate economic gain by increasing or decreasing cash inflows or outflows.

 

Asset Types

 

Current Asset

Short-term economic resources that are projected to be transformed into cash within a year are referred to as current assets.
Cash and cash equivalents, accounts receivable, inventories, and different prepaid expenses are all examples of current assets.


While cash is simple to value, accountants must reevaluate the recoverability of inventory and accounts receivable on a regular basis.
If there is evidence that accounts receivable might be uncollectible, it'll become impaired. Or if inventory becomes obsolete, companies may write off these assets.

 

Fixed Asset

Plants, equipment, and buildings are examples of long-term resources.
Depreciation is a recurring charge that may or may not reflect the loss of earning capacity for a fixed asset. It is used to account for the ageing of fixed assets.


Depreciation can be done in two ways, according to generally accepted accounting standards (GAAP).
The straight-line technique posits that the value of a fixed asset depreciates in proportion to its useful life, whereas the accelerated method assumes that the asset depreciates more rapidly in the early years of usage.

 

Financial Assets

Financial assets are investments in other institutions' assets and securities.
Stocks, sovereign and corporate bonds, preferred equity, and other hybrid securities are examples of financial assets.
The value of financial assets is determined by how the investment is classified and the motivation behind it.

 

Intangible Assets

Intangible assets are financial resources that do not have a physical location.
Patents, trademarks, copyrights, and goodwill are among them.
Intangible assets are treated differently depending on their type, and they might be amortised or assessed for impairment each year.