If you want to know the different assets you have to know in 2020 then you came to the right place where you get all the information. so read the full article to know Different assets you have to know in 2020.
- 1 WHAT ARE ASSETS IN ACCOUNTING?
- 2 Different assets you have to know
- 3 UNDERSTANDING TOTAL ASSETS AND NET ASSETS
WHAT ARE ASSETS IN ACCOUNTING?
The asset is a thing or a resource or property having a monetary/economic value possessed by an individual or entity, which is capable to generate some future economic benefit. Assets are brought in business for the benefit of them and to increase the value of a business. In simple language the asset means anything that a person “owns” says a house or equipment. In the accounting context, the asset is a resource that can generate cash flows. The assets are recorded on the balance sheet. They are found on the right-hand side of the balance sheet and can also be referred to as “Application of Funds”. The assets include in them are furniture, machinery, accounts receivable, cash, investments, etc. We discuss various Types of Assets in this article so read the full article.
Assets are classified on the basis of different types based on their convertibility to cash; use in business or basis their physical existence. Assets are the part of the balance sheet and are stated at historical cost less depreciation deducted so far or at cost or at cost or market value that why whichever is lower.
Different assets you have to know
Assets are classified on the following three ways depending upon nature and type:
1. ON THE BASIS OF CONVERTIBILITY
The way in which the classification of assets is based on their easy convertibility into cash. According to this classification the total assets are classified either into Current Assets or Fixed Assets.
Assets that can be converted into cash money by easily like so much of stock, inventory, marketable securities, short-term investments, fixed deposits, accrued incomes, bank balances, debtors, bills receivable, prepaid expenses, etc. the classification of current assets. Current assets are have so much less or shorter lifespan as compared to fixed assets which last for a longer period. Current assets can also be said as liquid assets.
Fixed assets are the assets which is fixed nature in the context that they are not readily convertible into cash. They require elaborate procedures and time for their sale and converted into cash. Land, building, plant, machinery, equipment, and furniture are examples of fixed assets. Other names that are used for fixed assets are non-current assets, long-term assets or hard assets.
2. ON THE BASIS OF PHYSICAL EXISTENCE
Another classification of assets depends upon their physical existence. According to this classification, an asset is either a tangible asset or an intangible asset.
Tangible assets are those assets that we can touch, see and feel. All fixed assets are tangible. Moreover, there are some current assets like inventory and cash fall under the category of tangible assets too.
We can not see and can not feel or touch Intangible assets physically. Some of the important examples of intangible assets are goodwill, franchise agreements, patents, copyrights, brands, trademarks, etc.
3. ON THE BASIS OF USAGE
According to the third way of classification, assets are either operating or non-operating. This classification is based on the usage of the asset for business operations. Assets which are predominantly used daily in the business are classified as operating assets and other assets that are not used in operation are classified as non-operating.
Operating assets are those assets that are required for the current day-to-day transaction. In normal words, this is the assets that a company uses for producing a product or service are operating assets. These assets include cash, bank balance, inventory, plant, equipment, etc.
All of the assets that are not used that are for daily business operations but is essential for the establishment of business and for its future needs are termed as non-operational. This includes so much real estate purchased to earn from its appreciation or excess cash in the business, which is not used in an operation.
UNDERSTANDING TOTAL ASSETS AND NET ASSETS
The meaning of the total assets is truly reflected in the accounting equation as the sum total of liabilities and owner’s equity. While “Net Assets” is a term that is used to state the difference between total assets and total liabilities. Consequently is the importance it can be noted that net assets and owner’s equity are virtually the same i.e. both the representative and the difference between “Total Assets” and “Total Liabilities”.
Total Assets = Total Liabilities + Owner’s Equity
Net Assets equal(=) Total Assets – Total Liabilities
These are all Different assets you have to know to save money. I hope you get the knowledge that you want and read the article on this website . This is a website where you get the information about then online earning.