CONCEPT OF ASSETS AND LIABILITIES

ASSETS: Assets refer to tangible objects or intangible rights of an enterprise hich carr! probable f"t"re benefits# Assets are properties of b"siness# Assets are classifie$ classifie$ on the basis of their nat"re# Different t!pes of assets are as "n$er: % FI&ED ASSETS: Fi'e$ asset is an asset ac("ire$ for contin"ing "se ithin the b"siness ith a )ie to earning inco*e or *a+ing profits fro* its "se either $irectl! or in$irectl!# A fi'e$ asset is not ac("ire$ for sale to a c"sto*er# TAN,IBLE FI&ED ASSETS A tangible fi'e$ asset is a ph!sical asset- i#e# one that has real soli$ e'istence- e#g# Plant . /achiner!- Lan$.B"il$ingan$ F"rnit"re etc# INTAN,IBLE FI&ED ASSETS An intangible fi'e$ asset is an asset Cop!rights etc# hich $oes not ha)e a ph!sical e'istence- e#g# ,oo$ ill- Patent- Tra$e*ar+s- an$

IN0EST/ENTS 1LON, TE2/3 An in)est*ent *ight also be a fi'e$ asset- in)est*ent p"rchase$ ith a )ie to hol$ing the* for *ore than a !ear are classifie$ as fi'e$ assets# C422ENT ASSETS: The assets of the b"siness in the for* of cash- $ebtors ban+ balances- bill recei)able an$ stoc+ are calle$ c"rrent assets as the! can be realise$ ithin an operating c!cle of one !ear to $ischarge liabilities FICTITIO4S ASSETS: Fictitio"s assets are not real assets# Past acc"*"late$ losses or e'penses hich are capitalise$ for the ti*e being- e'penses for pro*otion of organisations 1preli*inar! e'penses3- $isco"nt on iss"e of shares- $ebit balance of profit an$ loss acco"nt etc# are the e'a*ples of fictitio"s assets# 5ASTIN, ASSETS: These assets are also calle$ $epleting assets# Assets s"ch as *ines- Ti*ber forests- ("arries etc# hich beco*e e'ha"ste$ in )al"e b! a! of e'ca)ation of the *inerals- c"tting of oo$ etc# are +no n as asting assets# S"ch assets are "s"all! nat"ral reso"rces ith ph!sical li*itations# CONTIN,ENT ASSETS: Contingent assets are assets- the e'istence- )al"e possession of hich is base$ on happening or other ise of specific e)ents# For e'a*ple- if a b"siness fir* has file$ a s"it for a partic"lar propert! no in possession of other persons- the fir* ill get the propert! if the s"it is $eci$e$ in its fa)o"r# Till the s"it is $eci$e$it is a contingent asset# LIABILITIES: A liabilit! is an a*o"nt hich a b"siness fir* is 6liable to pa!7 legall!# All the a*o"nts hich are clai*s b! o"tsi$ers on the assets of the b"siness are +no n as liabilities# The! are cre$it balances in the le$ger# Liabilities are classifie$ into fo"r categories as gi)en belo # O5NE28S CAPITAL: Capital is the a*o"nt contrib"te$ b! the o ners of the b"siness# In a$$ition to initial capital intro$"ce$- proprietors *a! intro$"ce a$$itional capital an$ ith$ra so*e a*o"nts fro* b"siness o)er a perio$ of ti*e# O ner7s capital is also calle$ 6net orth7# Net orth is the total f"n$ of proprietors on a partic"lars $ate# It consists of capital- profits an$ interest on capital s"bject to re$"ction of $ra ings an$ interest on $ra ings# In case of li*ite$ co*panies- capital refers to capital s"bscribe$ b! sharehol$ers# Net orth refers to pai$ "p e("it! capital pl"s reser)es an$ profits- *in"s losses# 193

LON, TE2/ LIABILITIES: Liabilities repa!able after specific $"ration of long perio$ of ti*e are calle$ long ter* liabilities# The! $o not beco*e $"e for pa!*ent in the or$inar! 6operating c!cle7 of b"siness or ithin a short perio$ of li*e# E'a*ples are long ter* loans an$ $ebent"res# Long ter* liabilities *a! be sec"re$ or "nsec"re$- tho"gh "s"all! the! are sec"re$# C422ENT LIABILITIES: Liabilities hich are repa!able $"ring the operating c!cle of b"siness- "s"all! ithin a !ear- are calle$ short ter* liabilities or c"rrent liabilities# The! are pai$ o"t of c"rrent assets or b! the creation of other c"rrent liabilities# E'a*ples of c"rrent liabilities are tra$e cre$itors- bills pa!able- o"tstan$ing e'penses- ban+ o)er$raft- ta'es pa!able an$ $i)i$en$s pa!able# CONTIN,ENT LIABILITIES: Contingent liabilities ill res"lt into liabilities onl! if certain e)ents happen# E'a*ples are: Bills $isco"nte$ an$ en$orse$ hich *a! be $ishono"re$- "npai$ calls on in)est*ents#

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