Introduction
Assets consist of property of all
kinds, such as business buildings, machinery, furniture and fixtures, motor vehicles,
stocks of goods as well
as debts owed by customers, cash at bank and cash at hand, etc.
Definition
of Assets
Assets are probably
future economic benefits obtained or controlled by a particular enterprise as a
result of past transactions or events affecting the enterprise.
Asset is resource
controlled by the entity as a result of past events and from which future
economic benefits are expected to flow to the entity.
Essential
characteristics of an asset
A. A
probable future benefit exists involving a capacity, singularly or in combination
with other assets to contribute directly or indirectly to future net cash
inflows.
B. The
enterprise can obtain the benefit if not a prerequisites for an asset.
C. The
transaction or other event giving rise to the enterprises claim to or control
of the benefit has already occurred.
Once enterprise acquired
an asset, it continue as an asset until the
enterprise transfers it to another
entity or uses it , or another event or
circumstance destroys the future benefit or removes the enterprises ability to
obtain it.
Employees
are not considered assets like machinery is, even though they can generate
future economic benefits. This is because an entity does not have sufficient
control over its employees to satisfy the Framework's definition of an asset.
Resources that are expected to yield benefits only for a short time can also be
considered not to be assets,
The accounting equation is the mathematical
structure of the balance sheet. It relates assets, liabilities,
and owners equity.
Assets = Liabilities + Capital
Types
of asset
Assets are designated
under the fallowing headings.
1. Fixed
asset
Fixed
assets may be regarded as those assets of a business which are of a permanent
nature, and are definitely held for the purpose of earning revenue and not with
a view to resale e.g. plant and machinery, buildings.
2. Current
assets
These
may be regarded as those assets which are or acquired and merely held for a
short period of time with a view to sale at a profit in the ordinary course of
business, that is to say, they are easily convertible into cash e.g.
receivables, stock, bill receivable etc.
3. Fictitious
assets
These
are merely debit balances not written off, that is items of expenditure or
losses of an unusual character which are not recoupable e.g. preliminary
expenses.