Assets

Assets

Assets are things or resources which will either provide benefits in future or to be consumed by the organization in future. It is important to remember that such asset must controlled by the organization, and entity must be responsible for risk and rewards of asset. Some important characteristics of asset are listed below

a)    Asset is controlled by entity.

b)   Economic benefit will flow to entity.

c)    Risk and rewards belongs to entity.

Examples of Assets

a)    Property, Plant & machinery.

b)   Inventory.

c)    Receivables.

d)   Cash.

e)    Prepaid Expenses.

f)     Goodwill.

g)   Investments.

Recognition of Assets

Assets are recognized in the books of account subject to fulfillment of following conditions.

a)    Asset quality the asset definition.

b)   Asset amount can be measured reliably.

c)    Asset will provide future benefits.

Recording Rules of Assets

Increase in asset is debited, while decrease in asset is credited. This rule has been explained with an example

a)    Advance Rent paid of 60,000

b)   Plant purchased 80,000 on cash

Advance Rent is an asset as explained above shall be debited, while decrease in cash shall be credited. In this entry one asset is increasing, while other is decreasing.

Date	Particular	Folio	Dr.	Cr.
23.09.2016	Advance Rent		60,000
23.09.2016	Cash A/c			60,000

Plant purchased in cash shall be debited being increase in asset, while cash paid shall be credited due to decrease in cash.

Date	Particular	Folio	Dr.	Cr.
10.10.2016	Plant A/c		80,000
10.10.2016	Cash A/c			80,000

Tangible & Intangible Assets

Asset with physical existence is known as tangible asset. Examples of tangible asset are plant, machinery, inventory, cash etc.

 Assets without physical existence are called non tangible assets. Examples of intangibles assets are goodwill, patent rights, customer lists, etc.

Current & Non Current Assets

Assets which are expected to consumed or realized within one year are known as current asset. Examples of current asset are cash, receivables, prepaid expenses .

Assets which shall be realized after one year are known as noncurrent. Examples of noncurrent assets are plant, machinery, furniture, long term investments.

Non Current Asset
Property ,Plant & Equipment	10,000
Long Term Asset	5,000
Current Asset
Inventories	10,000
Trade Receivable	8,000
Cash	5,000

Arrangement of Assets

International accounting standard does not prescribe method for arranging the assets; however, generally assets are arranged in term of their liquidity. The most liquid asset is shown at the end as shown above.