What is an Asset? & Classification of Assets and Liabilities

What is an Asset?

An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

Classification of Assets

Current Assets: These assets are acquired and held for consumption or resale in the ordinary course of the business. Current assets include cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses and other liquid assets that can be readily converted to cash.

These are the assets which are to expected to use by the entity within 1 year from the reporting date.

Fixed Assets: These assets are permanent in nature. They are acquired for the purpose of generating revenue and are not meant for resale. For the purpose of showing in Balance Sheet, these assets are shown at cost less depreciation and market value is not under consideration because these assets are for the purpose of use. Fixed assets include land, building, plant & machinery, motor vehicle, furniture & fixtures, etc.

These are those assets whose benefit is expected to last more than 1 year from the reporting date.

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