Accounting Lesson #10 Assets

Accounting 101, Lesson #10: Assets

Hi guys, what’s up?

Hope everything’s fine

Last time we had an introductory lesson regarding the major accounting elements.

This time however, we are going to discuss thoroughly one of those accounting elements, the first balance sheet item, the asset account.

So, shall we?

As what we’ve earlier discussed in lesson 9 (which you can see here), assets must satisfy any if not all of the following criteria in order for it to be classified as, well… asset for that matter.

It should either be owned or controlled by the business entity.
It has future economic benefits that prove useful to the business entity.
It’s value can be measured reliably.

Classification of Assets

Accounting standards are one in classifying assets into two major categories. The current and the non-current.

Current assets are assets that can be utilized within one operating cycle/one calendar year whichever is longer.

furthermore current assets are subdivided into five basic line items per balance sheet classifications.(In accordance with the principle of aggregation)

Cash and cash equivalents
Financial assets
Trade and other receivables
Inventories
Prepaid expenses

On the other hand non-current assets as the standards simple states, “all assets that aren’t classified as current shall be classified as non-current” (a residual definition)

Similarly non-current assets just like current assets are also subdivided into line items which includes;

Property, plant and equipment
Long-term investments
Intangible assets
Other non-current assets

So, I guess that’s about it. At this point that’s all we really need to know.

Next time, I’ll give you a rundown of the commonly used asset account titles. That will give us a much easier understanding of classifying and recognizing business transactions.

Until then,

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