- Assets:
Anything owned by the business having the economic value or the resources of business having economic value are called assets. These resources help the business to earn a profit and have future value. Assets are the vital for every business organization. Assets are important for running a business or the possession.
Assets can be classified into following types: –
a. Fixed assets:
The assets which are used by business for a long time are called fixed assets or non-current assets.
These are continued to be used by the business for a period of more than one year.
For example:- land and building, Plant and machinery, Furniture and Fixtures, Motor vehicle, Live Stocks etc.
Fixed Assets can be further classified as
Tangible Assets and
Intangible Assets.
i. Tangible Assets:
Tangible assets are physically touchable, visible. For example items of value a company owns, like land and buildings, Plant and machinery, Motor Vehicles, and Inventory or Stock, Cash in Hand ect, can be touched and seen.
Examples of Tangible Assets: Business Premises, Machinery and Equipment, Office equipment like office computers, printers), Motor Cars, trucks, Loose tools atc.
Inventory : Raw materials, Work in process, Finished products are called inventory.
Other tangile assets like: Furniture and fixtures, Office equipments, Cash in Hands, Cheque in hands and cash equivalents, Investments, Stock-in-hand
ii. Intangible assets: Intangible assets having no physical existence. Intangible assets can never be seen. Invisible, untouchable.
Examples of intangible assets include:
Intellectual property Rights : Inventions, ideas, and innovations that are protected by intellectual property
Patents: The right to an invention, such as a new equipment invented.
Trademarks: The right to a business name like Trademark of Dabur, Samsung, LG atc.
Brands: A reputed product of a company with brand name like its logos and slogans or Product name. For Example: Lux, Lifebouy are different soap Brands of Hindustan Unilever Limited.
Goodwill: Reputation of a Company, because of this business earns extraordinary profit. A company’s brand recognition, consumer loyalty, and staff interactions.
Technical Know-how: A business’s expertise or specialised knowledge
Digital assets: Software and data
b. Current assets:
The assets which are used up in one year or easily get converted into cash in one year are called current assets. These assets are converted into cash within an accounting year.
For example:- Debtors, Cash in hand, Cash at Bank, Raw material, Finished Goods,
c. Fictitious assets:
Fictitious assets are non-existent or imaginary assets that cannot be converted to cash. They are expenses and losses that are written off over a period of time.
For example:
Heavy advertisement expenditure: Deferred Advertisement Expenditure: Means Expenses related to advertising a company for long term promotional purposes
Preliminary expenses: Expenses like legal expenses paid by the company to start a new business or fees and registration fees that occur before a company starts. These are written off against profits over a few years.
Discount on issue of Debentures: When a company issues Debentures to investors, the discount is not treated as a loss or an expense. It is categorised as a fictitious asset and written off over a period of time.