Financial Asset is an Economic Resource

An asset is an economic resource, anything tangible or intangible that can be owned or controlled to produce value and that is held to have positive economic value is considered an asset.  Simply we can explain assets represent the value of ownership that can be converted into cash.  Financial company records can calculate the monetary value of the assets owned by the firm. It is money and other valuables belonging to an individual or business.Two major asset classes are tangible assets and intangible assets.  Tangible assets contain various subclasses, including current assets and fixed assets.  Current assets include inventory, while fixed assets include such items as buildings and equipment.  Intangible assets are non physical resources and rights that have a value to the firm because they give the firm some kind of advantage in the market place, for examples of intangible assets are goodwill, copyrights, trademarks, patents and computer programs,and financial assets, including such items as accounts receivable, bonds and stock.

An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.  If you notify the asset characteristic,One of the most widely accepted accounting definitions of asset is the one used by the International Accounting Standards Board.  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.  It is explaining the probable present benefit involve 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 organizations to provide services. The entity can control access to the benefit but the transaction or event giving rise to the entity’s right to, or control of, the benefit has already occurred.  Employees are not considered assets like machinery is, even though they can generate future economic benefits.  This is because an entity does not have sufficient control over its employees to satisfy the framework’s definition of an asset.  Resources that are expected to yield benefits only for a short time can also be considered not to be assets, for example in the USA the 12 month rule excludes items with a useful life of less than a year, same thing in economics an asset is any form in which wealth can be held.

Financial assets are not necessary to be able to legally enforce the asset’s benefit for qualifying a resource as being an asset, provided the entity can control its use by other means.  The accounting equation is the mathematical structure of the balance sheet. It relates assets, liabilities, and owner’s equity.That is, the total value of a farm’s Assets are always equal to the combined value of its “equity” and “liabilities.”   Assets are listed on the balance sheet.   In a company’s balance sheet certain divisions are required by generally accepted accounting principles (GAAP), which vary from country to country.   Assets can be divided into e.g. current assets and fixed assets, often with further subdivisions such as cash, receivables and inventory. Assets are formally controlled and managed within larger organizations via the use of asset tracking tools.  These monitor the purchasing, upgrading, servicing, licensing, disposal of both physical and non-physical assets. Current assets are cash and other assets expected to be converted to cash or consumed either in a year or in the operating cycle , without disturbing the normal operations of a business.  These assets are continually turned over in the course of a business during normal business activity.

Cash and cash equivalents is the most liquid asset, which includes currency, deposit accounts, and negotiable instruments, for example money orders, cheque, bank drafts. Short-term investments are include securities bought and held for sale in the near future to generate income on short-term price differences between trading and securities.  Receivables are usually reported as net of allowance for non-collectible accounts.Inventory is 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 are expenses paid in cash and recorded as assets before they are used or consumed,common examples are insurance or office supplies.we can see also adjusting entries.  Marketable securities are the securities that can be converted into cash quickly at a reasonable price.  Net current assets also called working capital, it is often used and refers to the total of current assets less the total of current liabilities.  Long term investments are to be held for many years and are not intended to be disposed of in the near future.  This group usually consists of three kind of investments such as property, plant, and equipment, these are purchased for continued and long term use in earning profit in a business.  Long term earning asset is the real economic resource in business.

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