Noncurrent Asset Definition: A noncurrent asset is an asset that is not expected to be consumed within one year.

Some noncurrent assets may theoretically have unlimited useful lives. A noncurrent asset is recorded as an asset when incurred, rather than being charged to expense at once. Depreciation or amortization may be used to gradually reduce the amount of a noncurrent asset. In a capital-intensive industry, such as oil refining, a large part of the asset base of a business may be comprised of noncurrent assets. Conversely, a services business that requires a minimal amount of fixed assets may have few or no noncurrent assets. Noncurrent assets are aggregated onto the balance sheet, and are stated after all current assets. Examples of noncurrent assets are: Long-term investments Intangible fixed assets (such as patents) Tangible fixed assets (such as equipment and real estate) Goodwill There is more risk associated with noncurrent assets than with current assets, since they may decline in value during their extended holding periods. If a company has a high proportion of noncurrent to current assets, this can be an indicator of poor liquidity, since a large amount of cash may be needed to support ongoing investments in noncash assets. Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company's operating cycle is longer than one year, an item is a current asset if it will turn to cash or be used up within the operating cycle.) Current assets are presented in the order of liquidity, i.e., cash, temporary investments, accounts receivable, inventory, supplies, prepaid insurance.

Definition: A current asset is an item on an entity's balance sheet that is either cash, a cash equivalent, or which can be converted into cash within one year. Examples of current assets are: Cash Investments Prepaid expenses Accounts receivable Inventory

Inventory Definition: Inventory is an asset held for sale in the ordinary course of business, or that is in the process of being produced for sale, or the materials or supplies intended for consumption in the production process. This can include items purchased and held for resale. In the case of services, inventory can be the costs of a service for which related revenue has not yet been recognized. Cash Definition: Cash is bills, coins, bank balances, money orders, and checks. Items that do not fall within the definition of cash are post-dated checks and notes receivable. Most forms of cash are electronic, rather than bills and coins, since cash balances can be stated in the computer records for investment accounts. Cash is listed first in the balance sheet, since the reporting sequence is in order by liquidity, and cash is the most liquid of all assets. A related accounting term is cash equivalents, which refers to assets that can be readily converted into cash. A business is more likely to retain a large amount of cash on hand if it routinely deals with cash transactions (such as a pawn shop), and is less likely to retain much cash if it has an excellent cash forecasting system and can therefore invest in more illiquid but higher yielding investments with confidence.

Cash is assumed to be stated at its fair value at all times. Investment Definition: An investment is a payment made to acquire the securities of other entities, with the objective of earning a return. Can also mean the acquisition of fixed assets for internal use, also with the objective of earning a return. Prepaid Expense Definition: Prepaid expense is an expenditure that is paid for in one accounting period, but for which the underlying asset will not be entirely consumed until a future period. Consequently, it is carried on the balance sheet as an asset until it is consumed. An example is insurance, which is frequently paid in advance for multiple future periods; an entity initially records this expenditure as a prepaid expense, and then charges it to expense over the usage period. Accounts Receivable Definition: Accounts receivable is short-term amounts due from buyers to a seller who have purchased goods or services from the seller on credit. Accounts receivable is listed as a current asset on the seller's balance sheet. The total amount of accounts receivable allowed to an individual customer is typically limited by a credit limit, which is set by the seller's credit department, based on the finances of the buyer and its past payment history with the seller. Credit limits may be reduced during difficult financial conditions when the seller cannot afford to incur excessive bad debt losses. Prepaid Expense Definition: Prepaid expense is an expenditure that is paid for in one accounting period, but for which the underlying asset will not be entirely consumed until a future period. Consequently, it is carried on the balance sheet as an asset until it is consumed. An example is insurance, which is frequently paid in advance for multiple future periods; an entity initially records this expenditure as a prepaid expense, and then charges it to expense over the usage period. Accounts Receivable

Definition: Accounts receivable is short-term amounts due from buyers to a seller who have purchased goods or services from the seller on credit. Accounts receivable is listed as a current asset on the seller's balance sheet. The total amount of accounts receivable allowed to an individual customer is typically limited by a credit limit, which is set by the seller's credit department, based on the finances of the buyer and its past payment history with the seller. Credit limits may be reduced during difficult financial conditions when the seller cannot afford to incur excessive bad debt losses. Accounts receivable are commonly paired with the allowance for doubtful accounts (a contra account), in which is stored a reserve for bad debts. The combined balances in the accounts receivable and allowance accounts represent the net carrying value of accounts receivable. The seller may use its accounts receivable as collateral for a loan, or sell them off to a factor in exchange for immediate cash. The main problem with relying upon current assets as a measure of liquidity is that some of the accounts within this classification are not so liquid. In particular, it may be difficult to readily convert inventory into cash. Similarly, there may be some extremely overdue invoices within the accounts receivable number, though there should be an offsetting amount in the allowance for doubtful accounts to represent the amount that is not expected to be collected. Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land, buildings, equipment, and vehicles. Assets are reported on the balance sheet usually at cost or lower. Assets are also part of the accounting equation: Assets = Liabilities + Owner's (Stockholders') Equity. Assets are the resources owned by a business which benefit its future operations and are convertible to cash (cash itself is also an asset). Examples are cash, land, building, vehicles, receivables, etc. List of Asset Accounts Following are the common asset accounts:

Cash: In accounting, cash includes physical money such as bank notes and coins as well as amount deposited in bank for current use.

Accounts Receivable: It includes the money owed to the business by outsiders such as customers and other businesses. In most cases accounts receivable arise from sales or services provided on credit. There is no interest on accounts receivable.

Notes Receivable: Notes receivable includes the money owed to business by outsiders for which there is a formal document for proof of debt. In most cases Notes receivable also involve interest.

Prepaid Insurance: The cost of insurance premium paid in advance. Inventory: These are goods and materials held by a business for the purpose of sale or for the production process.

Supplies: Supplies include items held for use in miscellaneous activities by the business. It may include items used by business staff (for example: stationary products) and items used in production process (for example nails used in production of furniture).

Equipment: Equipment having life more than a year. Examples are Vehicles, Production Machinery, Computers etc.

Buildings: Buildings owned by the business. Examples are Office Building, Factory Building, Godown, Garage etc.

Land: Includes cost of all the land owned by the business. Also includes cost of the land with building on it.

Patents, Trade Mark, License: These are assets have no physical existence but have properties of assets.

The assets cash, accounts receivable, notes receivable, prepaid insurance, inventory and supplies are categorized as Current Assets. Equipment, buildings, land and patents are categorized as Non-Current Assets.

Those assets which have no physical existence are called intangible assets. 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 (IASB Framework). Explanation In simple words, asset is something which a business owns or controls to benefit from its use in some way. It may be something which directly generates revenue for the entity (e.g. a machine, inventory) or it may be something which supports the primary operations of the organization (e.g. office building). Classification Assets may be classified into Current and Non-Current. The distinction is made on the basis of time period in which the economic benefits from the asset will flow to the entity. Current Assets are ones that an entity expects to use within one-year time from the reporting date. Non Current Assets are those whose benefits are expected to last more than one year from the reporting date. Assets may be grouped as follows: i. ii. In order of Liquidity In order of Performance

Liquidity: Liquidity means the case with which assets may be converted into cash. Assets which are most difficult in this respect are written last. Permanence: Assets which are to be used permanently in the business and are meant to be sold are written first. Assets may be classified as

Fixed Assets

o o o

Tangible fixed assets. Intangible fixed assets. Investments (long-term)

Current Assets

Fixed Assets: Fixed asset is an asset acquired for continuing use within the business with a view to earning income or making profits from its use either directly or indirectly. A fixed asset is not acquired for sale to a customer. A tangible fixed asset is a physical asset, e.g. Plant & Machinery. An intangible fixed asset is nothing but an asset which does not have a physical existence, e.g. Goodwill. An investment might also be a fixed asset, investment purchased with a view to holding them for more than a year are classified as fixed assets. Current Assets: Current assets are either items owned by the business with the intention of their resale or cash including cash at bank deposited by the business. These assets are "Current" in the sense that they are continuously flowing. Other current Assets are: Short term investment. This includes short term trade investment. Prepayments: These are amounts which are already paid by the business for benefits which have not yetbeen consumed. Trade Debtors: These are debtors to the business for supply of goods to them. Types and Examples Following are the most common types of Assets and their Classification along with the economic benefits derived from those assets.

Asset

Classification

Economic Benefit

Machine

Non-current

Used

for

the of

production

goods for sale to customer. Office Building Non-current Provides space to employees administering company affairs. Vehicle Non-current Used in the for

transportation of company products and also for commuting. Inventory Current Cash is generated from the sale of inventory. Cash Receivables Current Current Cash! Will eventually

result in inflow of cash.

Intangible Asset Definition: An intangible asset is a non-physical asset having a useful life greater than one year. Examples of intangible assets are:

Marketing-related intangible assets

Trademarks Newspaper mastheads

Internet domain names Noncompetition agreements

Customer-related intangible assets

Customer lists Order backlog Customer relationships

Artistic-related intangible assets

Performance events Literary works Musical works Pictures Motion pictures and television programs

Contract-based intangible assets

Licensing agreements Service contracts Lease agreements Franchise agreements Broadcast rights Employment contracts Use rights (such as drilling rights or water rights)

Technology-based intangible assets

Patented technology Computer software Trade secrets (such as secret formulas and recipes)

Goodwill Definition: When an entity acquires another entity, goodwill is the difference between the purchase price and the amount of the price not assigned to assets and liabilities acquired in the acquisition that are specifically identified. Goodwill does not independently generate cash flows.