ASSETS - Properties (Resources) of value owned by a business.
- It must be owned by the organization, and
- It must have money value.
TYPES OF ASSETS
ASSETS
1. Current Assets: Are cash and non cash assets that are readily converted to cash and are available to pay current liabilities, or non cash assets that are consumed in operations within one year or the operating cycle, whichever is longer. There are several traditional accounts that are classified as current assets on the balance sheet.CASH - An asset consisting of coins, bills, money orders, Checks, Certificates of deposit, or treasury bills
Fixed deposits receipts - For certain periods - 1 year.
Treasury bills - Issued by the government.
Notes Receivable - Written promises in the hands of the creditors, that serve as evidence of debts
Accounts Receivable - A current asset for which an oral promise to pay, made by the customer, serve as evidence. Accounts used to record the amounts owed by charge customers (legal claims against charge customer).
Note: performed services or sales item.
Merchandise Inventory - Represents the value of goods on hand, either at the beginning or end of the accounting period.
Accounting Period - The period of time, no more than 1 year, covered by the three financial statements.
Supplies - One type of asset acquired by a firm; has much shorter life than equipment. Such as pencil, stationery, etc.
Prepaid Expense - An asset account an item that normally is considered to be an expense but, because it is paid in advance, is classified as an asset. When the value of the asset has been used up, an adjusting entry will convert this prepaid expense (asset) to an actual expense. Such as insurance policies and rent paid in advance.
2. Fixed Assets: An asset that has an expected useful life of 1 year or more. Fixed assets are also referred to as "plant assets" or "property, plant and equipment."
Property, Plant, and Equipment Assets - That have a useful life of more than 1 year and are used in the continuing operations of the organization.
Property - Which a person owns; possession; such as Land, or Land and Building.
Plant - The machinery, etc., used in an industrial process, etc.: The farm has its own lighting. (ex. generator)
Equipment (Office) - Such as typewriter, computer, fax machine, Xerox. etc.
Furniture and Fixtures - Such as desk, chair, cabinet, chair, etc.
Automobile Equipment - Such car, truck, for transportation.
LIABILITIES
Liabilities - Debts, amounts owed to creditors1. Current Liabilities - Liabilities that will be paid with current assets within one year or one operating cycle, whichever is longer.
Accounts Payable - Amounts owed creditors that result from the purchased of goods or services on account.
Notes Payable - Written promises in the hands of the makers, that serve as evidence of debts. If due within one year or one operating cycle, whichever is longer.
Interest Rate Payable - A percentage of the principal that is paid for the use of money borrowed.
Interest - Money paid for the use or borrowing of money.
Unearned Revenue - Advance payment for services that still must be performed. Unearned revenue represents a liability or obligation of the company receiving the payment for a service not yet rendered.
2. Non Current Liabilities - In general liabilities that have a due date more than a year beyond the balance sheet date or beyond one operating cycle, whichever is longer, are classified as non current source is considered non current, whatever the due date. There are several accounts that are classified as noncurrent liabilities, such as mortgages payable, Bonds Payable, Long-term Notes Payable.
