Asset- General Concept Of Assets

An asset refers to an item of value possessed by an individual, an organization or a government. An asset could also be referred to as a property or resources owned by a person. Different fields of study like Accounting and Economics have different definitions for asset.

In Business and Accounting, the most probably accepted definition of asset is the one used by the International Accounting Standards Board, which defines an asset, “as a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise”.

This definition was also in line with that given under the United States Generally Accepted Accounting Principles (US GAAP), which also defined Assets as “probable future economic benefits obtained or controlled, by a particular entity as a result of past transactions or events.” However in the field of Economics, an asset is any form in which wealth can be held.

From the definitions one can conclude that assets are valuable resources owned by organizations, which can be used for future benefits.

Assets can be classified according to how they are used at a particular time. From a company’s balance sheets, Generally Accepted Accounting Principles (GAAP) classifies assets according to the requirements, which vary from country to country. The provisions of GAAP classify Assets classified as Fixed Assets, Current Assets and intangible assets.

Fixed Assets according to Wikipedia are “tangible assets (i.e. they can be seen, touched etc) which are purchased for long-term use in earning profit in a business. This group includes land, buildings, machinery furniture, tools, etc. also they are referred to as PPE (property, plant, and equipment) in other words; Fixed Assets are also called capital Assets.

Current Assets are those assets, which are utilized by a business for short-term period. These assets are continually turned over in the course of a business during normal business activity. Current assets include cash, inventory, prepaid expenses, Debtors, short-term investments.

Intangible assets are those resources owned by businesses, which lack physical substance and usually are vary had to evaluate.

They include; Patents, copyrights, franchises, image and reputation, goodwill, trademarks, trade names etc. these assets are (according to US GAAP) amortized to expense over 5 to 40 yeas with the exception of goodwill.

Aside from classification of assets as fixed and current, tangible and intangible, asset can also be classified as financial Assets and non-financial asset.

Financial assets has to do with assets in the form of securities, stocks, shares and other investments that form the financial portfolio of the business, while non-financial assets are Equipment’s and other such like resources used by a business daily. It should be seen that assets are resources, which a firm small or big utilizes to achieve its objectives in the nearest furniture. The type of assets employed in a firm will depend on the nature of business in the organization or the objective the management wants to achieve.