Assets are things owned by a company. They are the resources of the company that have been acquired through transactions, and have future economic value that can be measured and expressed in terms of money. Assets are reported on the balance sheet usually at lower of cost or net realizable value.
When are Assets Recognized?
An item is recognized as an asset in the books of the entity when:
- The item is owned and controlled by the entity.
- The item can be measured reliably (in monetary terms)
- It is probable that the item will provide the entity with economic benefits in the future.
If all of the above criteria are satisfied, an entity should recognize the item as an asset in its records.
What are the Classifications of Assets?
Assets can be classified into two general categories:
- Current Assets (Short-term assets) - These are assets that are expected to be realized, sold or consumed within one year or the normal operating cycle.
- Noncurrent Assets (Long-term assets) - These are assets that are expected to be realized, sold or used beyond one year or beyond the normal operating cycle.
Presentation of Assets
Assets are presented in the Statement of Financial Position (Balance Sheet). Asset accounts are arranged in the Balance Sheet according to liquidity.