Assets are any property owned by a person or business.

Tangible assets include money, land,

buildings, investments, inventory, cars, trucks, boats, or other valuables. Intangibles such as goodwill
are also considered to be assets.

Fixed asset
Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is a
term used in accounting for assets and property that cannot easily be converted intocash. This can be
compared with current assets such as cash or bank accounts, which are described as liquid assets. In
most cases, only tangible assets are referred to as fixed. International Accounting Standard (IAS) 16,
defines Fixed Assets as assets whose future economic benefit is probable to flow into the entity, whose
cost can be measured reliably.
Moreover, a fixed/non-current asset can also be defined as an asset not directly sold to a firm's
consumers/end-users. As an example, a baking firm's current assets would be its inventory (in this case,
flour, yeast, etc.), the value of sales owed to the firm via credit (i.e. debtors or accounts receivable), cash
held in the bank, etc. Its non-current assets would be the oven used to bake bread, motor vehicles used
to transport deliveries, cash registers used to handle cash payments, etc. While these non-current assets
have value, they are not directly sold to consumers and cannot be easily converted to cash.
These are items of value that the organization has bought and will use for an extended period of time;
fixed assets normally include items such as land and buildings, motor vehicles, furniture,office
equipment, computers, fixtures and fittings, and plant and machinery. These often receive favorable tax
treatment (depreciation allowance) over short-term assets.
It is pertinent to note that the cost of a fixed asset is its purchase price, including import duties and other
deductible trade discounts and rebates. In addition, cost attributable to bringing and installing the asset in
its needed location and the initial estimate of dismantling and removing the item if they are eventually no
longer needed on the location.
The primary objective of a business entity is to make profit and increase the wealth of its owners. In the
attainment of this objective it is required that the management will exercise due care and diligence in
applying the basic accounting concept of Matching Concept. Matching concept is simply matching the
expenses of a period against the revenues of the same period.
The use of assets in the generation of revenue is usually more than a year, i.e. long term. It is therefore
obligatory that in order to accurately determine the net income or profit for a period depreciation is
charged on the total value of asset that contributed to the revenue for the period in consideration and
charge against the same revenue of the same period. This is essential in the prudent reporting of the net
revenue for the entity in the period.
Net book value of an asset is basically the difference between the historical cost of that asset and its
associated depreciation. From the foregoing, it is apparent that in order to report a true and fair position of

the financial jurisprudence of an entity it is relatable to record and report the value of fixed assets at its net
book value. Apart from the fact that it is enshrined in Standard Accounting Statement (SAS) 3 and IAS 16
that value of asset should be carried at the net book value, it is the best way of consciously presenting the
value of assets to the owners of the business and potential investor.

Depreciating a fixed asset

Depreciation is, simply put, the expense generated by the uses of an asset. It is the wear and tear of an
asset or diminution in the historical value owing to usage. Further to this; it is the cost of the asset less
any salvage value over its estimated useful life. It is an expense because it is matched against the
revenue generated through the use of the same asset. Depreciation is usually spread over the economic
useful life of an asset because it is regarded as the cost of an asset absorbed over its useful life.
Invariably the depreciation expense is charged against the revenue generated through the use of the
asset. The method of depreciation to be adopted is best left for the management to decide in
consideration to the peculiarity of the business, prevailing economic condition of the assets and existing
accounting guideline and principles as implied in the organizational policies.
It is worth noting that not all fixed assets depreciate in value year-over-year. Land and buildings, for
example, may often increase in value depending on local real-estate conditions. Fixed assets are
sometimes collectively referred to as "plant".
Capital Assets, also known as Fixed Assets, are those assets such as land, buildings, and
equipment acquired to carry on the business of a company with a life exceeding one year. In financial
records these Fixed Assets are usually expressed as the cost of the asset minus depreciation.
Fixed assets are assets which are deemed to be used or owned for a long time in the company. A long
time in the EU is considered to be more than a year. All other assets - except signed but not paid
capital - are current assets. It is the intention that is decisive. It may be necessary to reclassify an
asset if the intention of the holding changes. In a situation where you conduct a reclassification you
should mention this in the supplementary disclosures of the balance sheet. There is no fixed time limit
for when an asset should be counted as fixed assets or current assets.
There are three kinds of fixed assets:
Intangible assets
Tangible assets
Financial assets
The exact demarcation between these different types of assets are not entirely clarified by the law.
Acquisition value

Fixed assets should be shown by the purchase price as a general rule, the amount should be equal to
the expenditure of the asset acquisition or manufacture. If value-added enhancements such as
increased standard measures are carried out, the expenditure can be included in the acquisition value.
If capital is borrowed to finance the production of the asset the interest can be included, if the interest
is related to production.
Impairment of fixed assets
If a fixed asset on the balance sheet date has a lower value than the purchase price minus
depreciation, the asset should be reduced to a lower value, if the value endures.
Revaluation of fixed assets
If the value of the asset rises, for example, because of increasing market prices, there is a certain
amount of leeway for revaluing these assets. But you have to be cautious.
Examples of relevant rules are:
The valuation of the new higher value must be reliable
The new higher value must be permanent
The new value will substantially exceed the book value
Asset register
A company must have access to detailed information on its fixed assets. This data should be collected
in a directory . This directory should include information that makes it possible to identify the asset,
an indication of the date of acquisition and purchase price. In a company with a smaller number of
establishments, this register may consist of a binder with copies of invoices arranged chronologically.
Intangible assets
An intangible asset is an asset that has a lasting value for a company without being visible. It can be
reprocessed by the company or purchased.
An intangible asset can be:
Goodwill
Trademarks

 Expenditure on research and development

Patents, licenses and trademarks
Special rights to property
Rights to special designs
Intangible assets are valued on the basis of the purchase price. However, if the income of the expense
is uncertain, it may not be recorded as an asset. The depreciation shall be a maximum of five years
unless a different period of time with a reasonable degree of certainty can be established.
Tangible assets
A tangible fixed asset is an asset that has a lasting value for the company and, unlike the intangible
assets, is physically detectable.
Tangible assets can be:
Buildings and domains
Machinery and other technical facilities
Inventory, tools and installations
Buildings under construction and prepaid expenses which are marked for tangible assets.
Tangible assets that have a limited lifetime should be depreciated systematically over their lifetime.
Financial assets
A financial asset should be a long-term claim. It could, for example, be a claim with a due date longer
than a year. Claims shorter than 1 year should be current assets.
A financial asset can be:
Shares, shares in group
Receivables from a group of a company
Shares, shares in associated companies

 Receivables from associated companies

Other long-term securities holdings
Loan to shareholders and relations
Other long-term receivables

Current asset
In accounting, a current asset is an asset which can either be converted to cash or used to pay current
liabilities within 12 months. Typical current assets include cash, cash equivalents, short-term
investments, accounts receivable, stock inventory and the portion of prepaid liabilities which will be paid
within a year.[1]
On a balance sheet, assets will typically be classified into current assets and long-term assets.
The current ratio is calculated by dividing total current assets by total current liabilities. It is frequently
used as an indicator of a company's liquidity, its ability to meet short-term obligations.
Current Assets are items such as cash, inventory, and accounts receivable that are currently cash or
expected to be turned into cash within one year.
Current assets
Current assets are all other assets that are not counted as fixed assets. As the word implies, current
assets are assets in daily usage in company operations.
Acquisition value
Current assets are valued according to the so-called minimum value principle. This means that access
should be booked at the minimum of its acquisition value. The acquisition value of the current asset
refers to the expense for buying or manufacturing the asset. This includes shipping, customs and
other expenses.
Current assets are divided into four types:
Inventories
Short-term receivables
Short-term investments

 Cash and bank

In real estate, it is mainly fuel oil that is accounted for in inventories. Even if you make a major
purchase of refrigerators for future needs, they will be accounted as inventory availability. This
requires that stock is inventoried at the end of the financial year. In real estate, valuation problems
occurring with rent receivables are common. The rule of general concerns regarding the minimum
value principle should be applied in these cases.
Inventories
Inventories are divided into five types:
Raw materials and supplies
Works in progress
Commodities
Ongoing work on behalf of others
Advances to suppliers
The kind of stock that the company holds naturally depends on the company's activity. An inventory
includes only those goods that are meant to be sold not office supplies that are used within the
company. An inventory has to be made as a basis for the stock.
Short-term receivables
Short-term receivables can be divided into different groups of assets:
Customer receivables
Receivables from a group of company
Receivables from associated companies
Prepaid expenses and accrued income
Short-term investments
Short-term investments can be divided into three groups:

 Shares in a group of company

Own stocks
Other short-term investments
Cash and bank assets
Cash and bank assets can be divided into four groups:
Checks
Bills of exchange
Payment cards from the bank and the post office
Cash
Cash and bank assets are the most volatile assets. Excessive cash in a limited company or an
association might be an indication of prohibited loans or other irregularities. In an individual enterprise
and in partnerships, however, it can be an advantage to have much cash on hand in case of incoming
interest and/or to use for expansions. A minimum amount of cash may be an indication of unrecorded
income.