Assets

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on June 22, 2021

Learning Objectives:

  • What are assets in accounting?
  • Types of Assets
  • Classification of Assets

Definition of Assets

Properties, things and receivables having certain values owned by the business are called assets.

Examples

Following are some examples of assets.
Cash, Debtors, Stock, Accounts Receivable, Prepaid Expenses, Land, Building, Plant, Machinery, Motor Vehicles, Furniture, Fixture, Goodwill, Patents, Copy Rights, Trade Marks, Patterns, Deferred Cost, etc.

List of Assets

Fixed Assets

    1. Tangible Assets:
      • Land
      • Building
      • Plant
      • Machinery
      • Motor Vehicles
      • Furniture
      • Fixture and Fittings
      • Long-Term Investments
      • Mines
      • Forests
    2. Intangible Assets:
      • Good Will
      • Patents
      • Trade Marks
      • Copy Rights

Current Assets:

  • Cash in hand
  • Cash at bank
  • Marketable Securities
  • Sundry Debtors
  • Bills Receivable
  • Stock
  • Prepaid Expenses
  • Accrued Income

Fictitious Assets:

  • Preliminary Expenses
  • Discount on issue of shares
  • Discount on issue of debentures
  • Loss on issue of shares
  • Loss on issue of debentures
  • Technical Know-how

Classification of Assets

Classification of Assets

1. Real Assets

The assets which have their market value are called real assets.
Examples:
Cash, Debtors, Stock, Accounts Receivable, Prepaid Expenses, Land, Building, Furniture, Goodwill, Patents, Copy Rights, Trade Marks, Patterns, etc.

(A). Fixed Assets

Assets that have long life or assets of permanent nature with which business is carried on are called fixed assets.

Examples:

Land, Building, Plant, Machinery, Motor Vehicles, Furniture, Fixture, Fittings etc.
Following are the types of Fixed Assets:
(i). Tangible Assets
Assets which have physical existence are called tangible assets. Examples are Cash, Land, Building, Furniture, Plant and Machinery, etc. The following are the types of Tangible Assets.

  • WASTING ASSETS
    Assets whose value is gradually reduced due to their usage, and finally exhausted completely, are called wasting assets. Examples are Mine, Forests, etc.
  • NON-WASTING ASSETS
    Assets whose values are gradually reduced due to their usage, but does not exhaust completely, are called wasting assets. Examples are Mines, Forests, etc.

(ii). Intangible Assets
Assets which have no physical existence are called intangible assets. Trade Marks, Copy Rights, Patents and Goodwill are examples of Intangible Assets.

(B). Current Assets

Assets which are already in the form of cash and can be converted into cash quickly are called current assets.

Examples:

Cash in hand, Cash at Bank, Accounts Receivable, Stock, Prepaid.
Following are the types of Current Assets:

  • Liquid Assets or Quick Assets
    All current assets excluding stock/inventory and prepaid expenses are called liquid assets. Or Assets which are already in the form of cash and can be converted into cash very quickly are called liquid or quick assets. Examples of liquid assets are Cash in hand, Cash at the bank, Accounts Receivable, etc.
  • Floating Assets
    Those assets which are bought, manufactured or held for selling purpose are called floating assets. The stock of Raw Material, Stock of Finished Goods, etc are examples of Floating Assets.

2. Fictitious  Assets

The assets which have no market value are called fictitious assets.

Examples:

Deferred Cost such as Preliminary Expenses, Loss on issue of shares Discount on issue of shares, Loss on issue of debentures and Discount on issue of debentures.

Some Other Types of Assets

  1. Contingent Assets
    Those assets which come into existence upon the happening of a certain event are called contingent assets. Actually, these are not assets at present but become assets in the future upon happening of a certain event.
    Example: Suppose we have filed a legal suit against someone for damages. It is a “Contingent Asset” because; it will come into existence if the court will give a decision in our favor.
  2. Outstanding Assets
    Income earned but not received (Accrued Income) and expenses paid in advance are called outstanding assets.
    Examples: Prepaid insurance, Accrued interest on investment, etc.

Leave a Comment