Asset 2390 225549688 2008-07-14T07:19:49Z 125.18.2.25 /* Current assets */ {{Otheruses1|the business definition}} In [[business]] and [[accounting]], an '''asset''' is defined as a probable future economic benefit obtained or controlled by a particular entity as a result of a ''past'' transaction or event. ==Asset characteristics== Assets have three essential characteristics: The probable future benefit involves a capacity, singly or in combination with other assets, in the case of profit oriented enterprises, to contribute directly or indirectly to future net [[cash flows]], and, in the case of [[Non-profit organization|not-for-profit organizations]], to provide services; *The entity can control access to the benefit; and, *The transaction or event giving rise to the entity's right to, or control of, the benefit has already occurred. It is not necessary, in the [[financial accounting]] sense of the term, for control of assets to the benefit to be legally enforceable for a resource to be an asset, provided the entity can control its use by other means. It is important to understand that in an accounting sense an asset is not the same as ownership. In accounting, ownership is described by the term "equity," (see the related term [[shareholders' equity]]). Assets are equal to "equity" plus "[[liabilities]]." The [[accounting equation]] relates assets, [[liabilities]], and [[ownership equity|owner's equity]]: :Assets = Liabilities + Owners' Equity The accounting equation is the mathematical structure of the [[balance sheet]]. Assets are usually listed on the [[balance sheet]]. It has a [[normal balance]], or usual balance, of [[debit]] (i.e., asset account amounts appear on the left side of a [[ledger]]). Similarly, in [[economics]] an asset is any form in which [[wealth]] can be held. Probably the most accepted accounting definition of '''asset''' is the one used by the [[International Accounting Standards Board]] <ref>[http://www.iasb.org/Home.htm The International Accounting Standards Board], IASB</ref>. The following is a quotation from the IFRS Framework: "An asset is 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." <ref>[http://www.iasb.org/NR/rdonlyres/1C268B9D-C477-4C0F-BA86-7C540ACA5E56/0/Dec050512ob02a.pdf IFRS]</ref> Assets are formally controlled and managed within larger organizations via the use of asset tracking tools. These monitor the purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non-physical assets. ==Classification of assets== Assets may be classified in many ways. In a company's [[balance sheet]] certain divisions are required by [[generally accepted accounting principles]] (GAAP), which vary from country to country. ===Current assets=== {{main|Current asset}} Current assets are cash and other assets expected to be converted to cash, sold, or consumed either in a year or in the operating cycle. These assets are continually turned over in the course of a business during normal business activity. There are 5 major items included into current assets: # '''[[Cash and cash equivalents]]''' — it is the most [[Market liquidity|liquid asset]], which includes [[currency]], [[deposit account]]s, and [[negotiable instrument]]s (e.g., money orders, cheque, bank drafts). # '''Short-term investments''' — include securities bought and held for sale in the near future to generate income on short-term price differences (trading securities). # '''Receivables''' — usually reported as net of allowance for uncollectable accounts. # '''[[Inventory]]''' — trading these assets is a normal business of a company. The inventory value reported on the [[balance sheet]] is usually the historical cost or fair market value, whichever is lower. This is known as the "lower of cost or market" rule. # '''Prepaid expenses''' — these are expenses paid in cash and recorded as assets before they are used or consumed (a common example is insurance). See also [[adjusting entries]]. The phrase ''net current assets'' (also called ''[[working capital]]'') is often used and refers to the total of current assets less the total of current [[liability|liabilities]]. ===Long-term investments=== Often referred to simply as "investments". Long-term investments are to be held for many years and are not intended to be disposed in the near future. This group usually consists of four types of investments: # Investments in securities, such as bonds, common stock, or long-term notes. # Investments in fixed assets not used in operations (e.g., land held for sale). # Investments in special funds (e.g., sinking funds or pension funds). # Investments in [[subsidiary|subsidiaries]] or affiliated companies. Different forms of [[insurance]] may also be treated as long term investments. ===Fixed assets=== {{main|Fixed asset}} Also referred to as PPE (property, plant, and equipment), or ''tangible assets'', these are purchased for continued and long-term use in earning [[profit]] in a business. This group includes [[Land (economics)|land]], [[building]]s, [[machinery]], [[furniture]], [[tool]]s, and certain wasting resources e.g., timberland and [[mineral]]s. They are written off against [[profit]]s over their anticipated life by charging [[depreciation]] expenses (with exception of land). Accumulated depreciation is shown in the face of the balance sheet or in the notes. These are also called [[capital asset]]s in [[management accounting]]. ===Intangible assets=== {{main|Intangible asset}} Intangible assets lack physical substance and usually are very hard to evaluate. They include [[patent]]s, [[copyright]]s, [[franchising|franchises]], [[goodwill]], [[trademark]]s, [[trade name]]s, etc. These assets are (according to US GAAP) amortized to expense over 5 to 40 years with the exception of goodwill. Some assets such as [[website]]s are treated differently in different countries and may fall under either tangible or intangible assets. ==References== <references /> ==See also== *[[Asset valuation]] *[[Asset management (physical)]] *[[Balance sheet]] *[[Commodity]] *[[Financial markets]] *[[Gold as an investment]] *[[Hidden asset]] *[[Inflation tax]] *[[Liability]] *[[Lists of corporate assets]] *[[Real estate]] *[[Stockholders' deficit]] *[[Share (finance)]] *[[Global assets under management]] ==External links== {{Wiktionarypar|asset}} *[http://pods.dasnr.okstate.edu/docushare/dsweb/Get/Document-2489/T-4147web.pdf Protecting Business Assets]: An article from Oklahoma State University *[http://www.greekshares.com/assetall.php Asset Allocation] *[http://www.utexas.edu/law/faculty/calvinjohnson/Pooling.pdf Roundtable on accounting for intangible assets] {{Economicsfooter}} [[Category:Generally Accepted Accounting Principles]] [[da:Aktiv]] [[de:Aktiva]] [[es:Activo (contabilidad)]] [[fr:Actif]] [[hr:Aktiva]] [[id:Aktiva]] [[ja:資産]] [[hu:Eszköz (számvitel)]] [[lt:Debetas]] [[mn:Актив]] [[nl:Activa]] [[no:Aktiva]] [[pl:Aktywa]] [[pt:Ativo]] [[ru:Актив]] [[sr:Актива]] [[sv:Tillgångar]] [[uk:Активи]] [[zh:資產]] [[uk:Актив]]