Question

Give a classification of assets.

What are fictitious assets. 

Explain types of business assets. 

Answer 1

The assets are classified into the following categories:

1. Fixed Assets: Fixed assets are acquired for long-term usage and are not intended for resale. However, they may be sold later. The Balance Sheet displays these assets at their cost minus depreciation, providing information on both figures. The gross block refers to the total amount of fixed assets, while the net block subtracts depreciation. Fixed assets with a limited useful life and rapid depreciation are known as wasting assets. These assets might be tangible (e.g. land, buildings, plant and machinery, furniture and fixtures) or intangible (e.g. goodwill, patents).
   1. Tangible Fixed Assets are visible and touchable assets such as land, buildings, machinery, furniture, and fixtures.
   2. Intangible Fixed Assets include a company's goodwill, patents, trademarks, and other intangible assets that cannot be seen or touched.
2. Investments: Investments include money invested in numerous types of securities. There are two types of investments: long-term and short-term. Long-term investments are classified as fixed assets, while short-term investments are classified as current assets.
3. Current Assets: Current assets are business assets that are temporarily held for sales or conversion into cash. These assets are expected to be realised within one year or within the formal operational cycle. Selling assets generates profit for a business, but holding them on hand does not. Examples include unsold finished items, debtor payments, receivables, bank balance, and cash on hand. These assets are temporary and may change. These are also known as "floating or circulating assets". Trades rely on these assets to cover present liabilities. All current assets, save closing stock, are referred to as 'quick assets'. These include cash, bank balances, bills receivable, debtors, and easily marketable securities.
4. Fictitious Assets: Fictitious assets have no market value because they are not secured by property. Examples of artificial assets include preliminary expenses and discounts on share and debenture issues. These will be written down against the Profit and Loss Account. 
5. Wasting Assets: The value of these assets diminishes with the passage of time. Leasehold rights, mines, copyrights are examples of wasting assets.