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The balance sheet of a firm records the monetaryJ. G. Siegel, N. Dauber & J. K. Shim, "The Vest Pocket CPA", Wiley, 2005. There are different methods of assessing the monetary value of the assets recorded on the Balance Sheet. In some cases, the ''Historical Cost'' is used; such that the value of the asset when it was bought in the past is used as the monetary value. In other instances, the present fair market value of the asset is used to determine the value shown on the balance sheet.
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.
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.
It is important to understand that in an accounting sense an asset is not the same as ownership. Assets are equal to "equity" plus "liabilities."
The accounting equation relates assets, liabilities, and owner's equity:
:Assets = Liabilities + Stockholder's Equity (Owner's Equity)
The accounting equation is the mathematical structure of the balance sheet.
Assets are listed on the balance sheet. Similarly, in economics an asset is any form in which wealth can be held.
Probably the most accepted accounting definition of asset is the one used by the International Accounting Standards Board . The following is a quotation from the IFRS Framework: "An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise."
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.
In a company's balance sheet certain divisions are required by generally accepted accounting principles (GAAP), which vary from country to country.
Current assets are cash and other assets expected to be converted to cash, sold, or consumed either in a year or in the operating cycle (whichever is shorter), 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: # 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). # Receivables — usually reported as net of allowance for uncollectable accounts. # 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 (a common example is insurance). See also adjusting entries. Marketable securities Securities that can be converted into cash quickly at a reasonable price
The phrase ''net current assets'' (also called ''working capital'') is often used and refers to the total of current assets less the total of current liabilities.
Different forms of insurance may also be treated as long term investments.
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, buildings, machinery, furniture, tools, 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). Accumulated depreciation is shown in the face of the balance sheet or in the notes.
These are also called capital assets in management accounting.
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.
Websites are treated differently in different countries and may fall under either tangible or intangible assets.
They can represent a large portion of intangible and tangible asset of an organization.
If these assets become unavailable, business operations can be disrupted. Confidential information disclosure can represent a huge liability.
While evaluating the potential loss tied to an asset or a group of assets, the value tied to the largest sum between the related asset and their value should be considered.
Category:Accounting terminology
af:Bate ar:أصول ca:Actiu (comptabilitat) cs:Aktivum (účetnictví) da:Aktiv de:Aktiva es:Activo (contabilidad) eu:Aktibo fa:دارایی fr:Actif (finances) ko:자산 hr:Aktiva id:Aset it:Cespite lt:Aktyvas hu:Eszköz (számvitel) ms:Aset nl:Activa ja:資産 no:Aktiva pl:Aktywa pt:Ativo ro:Active ru:Актив sq:Aset simple:Assets sr:Aktiva sv:Tillgång ta:சொத்து uk:Актив vi:Tài sản zh:资产This text is licensed under the Creative Commons CC-BY-SA License. This text was originally published on Wikipedia and was developed by the Wikipedia community.
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