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What is an asset? and classification of assets

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You might have used the term ‘Asset’ many times in you life. The real meaning of assets in accounting concepts is “Assets are what the business owns”.Assets are the things of value owned by a business or economic resources of a business. Assets are business¬†property and possessions such as cash, book debts or debtors ,stock, land and building ,furniture etc.

Assets are classified according to its nature as follows.

  1. Current Asset:- Assets that are in the form of cash or that can be converted into cash within a short period of time ( usually, twelve months) are known as current asset.
  2. Fixed Asset:- Fixed assets are assets assets of a relatively permanent nature which are used in the operation and are not intended to for a sale.
  3. Intangible Assets:- Certain assets have no material existence, they cannot be touched or seen.Such assets exist simple by means of book entry. example. Goodwill, patent,copyright.
  4. Fictitious asset:- These are not real asset but simply debit balances or losses carried forward from one accounting period to the next. For example advertising suspense account.
  5. Wasting assets:-Generally speaking all assets that lose value through wear and tear or constant use,as for example ,Plant and machinery are wasting assets. But the term is more appropriately used to refer only those assets which become exhausted through being worked,such as ,mines,quarries etc.

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