1.14 assets
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1.14 ASSETS
Assets
Liabilities
Owner’s Equity
Revenues
Elements of Accounting
Expenses
© Michael Allison. Author’s permission required for external use.
Assets
Definition:
An asset is:
1. A resource controlled by the entity
2. As a result of past events (transactions)
3. From which future economic benefits are expected to flow to the entity
1.14 ASSETS
© Michael Allison. Author’s permission required for external use.
Assets
Resources controlled by the entity:
The resource must be under the control of the fi rm , i.e. the fi rm decides how and when it is used and not someone else
E.g. Jack owns a small business – his brother has lent him the use of his delivery van to use in the business, valued at $50,000
Is this an Asset of the business?
1.14 ASSETS
$50,000 No – the business does NOT
have an Asset
The business (or Jack) does not control the resource – the van belongs to his brother
The brother can make decisions about the van – not the business, e.g.
Sel l the van
Put new tyres of the van
© Michael Allison. Author’s permission required for external use.
Assets
Arises from past events – the asset comes about because of a transaction the business engaged in in the past.
1.14 ASSETS
Business
Other Party
© Michael Allison. Author’s permission required for external use.
Assets
Will provide future economic benefi ts
The resource must be capable of generating some sort of economic gain for the fi rm in the future.
There must be some sort of benefi t that is yet to be received.
Business
Future economic benefit
1.14 ASSETS
© Michael Allison. Author’s permission required for external use.
Assets
The future economic benefi t provided by an asset can be cash…
Example: a fi rm has a debtor owing $1,000
Business
Future economic benefit
When the debtor pays the business, the economic benefit flowing into the business will be money…
1.14 ASSETS
© Michael Allison. Author’s permission required for external use.
Assets
The future economic benefi t provided by an asset is not always cash…
Example: a fi rm has a delivery vehicle valued at $30,000
Business
Future economic benefit
The economic benefit provided by the vehicle will be the ability to make deliveries to customers in the future
1.14 ASSETS
© Michael Allison. Author’s permission required for external use.
Assets
The future economic benefi t provided by an asset is not always cash…
Example: a fi rm prepaid $1,200 of insurance for 2015…
Business
Future economic benefit
The economic benefit provided during the rest of 2015 is insurance protection in the event of an emergency
Insurance protection
1.14 ASSETS
© Michael Allison. Author’s permission required for external use.
Cash Stock Land and buildings
Plant and equipment
Computer equipment
Fixtures and fittings
Computer software
Goodwill -
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
500.0
9.9
251.5
454.0
61.8
25.9
174.8
14.3 30.3
David Jones – Assets ($m)
1.14 ASSETS