What
is asset?
Asset is a resource of
organization which has the capacity of generating economic benefit for the
entity. For example plant & machinery which will generate future cash flow
for the organization by facilitating production.
The economic benefit can
be generated in number of ways for example cash generation, replacement with
other asset, liability settlement.
What
is control of asset?
The control of an asset
means that organization is responsible for risk and reward associated with
asset. The asset is recognized in the financial statement on the bases of
control and not on the bases of legal ownership.
Finance lease asset are recognized
in the financial statement, despite the fact that legal ownership is with the
other part, because risk and reward have been transferred to the organization.
What
are future asset?
There is no concept of future
asset; you cannot recognize a future asset in your book of account. For example
organization cannot recognize the asset on the bases of intention or future plans
of buying. The asset is always arising from the past event.
How
assets are created?
Assets are ordinarily
created by producing or acquiring. However, in some circumstance asset may be
given free of cost, for example Land given by Government to set up an industry
in under developed area.
What
are different types of assets?
Asset can be classified in
number of ways i.e. in term of tangibility, period of utilization, nature. An asset
can be part of more than one group due to different classification bases. For example
asset can be tangible and non current at the same time.
Tangible asset can be
touched and has physical existence like plant and machinery. Intangible asset
which cannot be touched and does not have physical existence for example patent
rights.
Current asset expected to
be used for one year like inventory, non current asset will be used for more
than one year like plant and machinery.
