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CONCEPT OF ASSETS AND LIABILITIES

ASSETS:

Assets refer to tangible objects or intangible rights of an enterprise hich carr! probable f"t"re benefits# Assets are

properties of b"siness#Assets are classifie$ classifie$ on the basis of their nat"re# Different t!pes of assets are as

"n$er:%

FI&ED ASSETS: Fi'e$ asset is an asset ac("ire$ for contin"ing "se ithin the b"siness ith a )ie to earning inco*eor *a+ing profits fro* its "se either $irectl! or in$irectl!# A fi'e$ asset is not ac("ire$ for sale to a c"sto*er#

TAN,IBLE FI&ED ASSETS

A tangible fi'e$ asset is a ph!sical asset- i#e# one that has real soli$ e'istence- e#g# Plant . /achiner!- Lan$.B"il$ing-an$ F"rnit"re etc#

INTAN,IBLE FI&ED ASSETS

An intangible fi'e$ asset is an asset hich $oes not ha)e a ph!sical e'istence- e#g# ,oo$ill- Patent- Tra$e*ar+s- an$

Cop!rights etc#

IN0EST/ENTS 1LON, TE2/3

An in)est*ent *ight also be a fi'e$ asset- in)est*ent p"rchase$ ith a )ie to hol$ing the* for *ore than a !ear are

classifie$ as fi'e$ assets#

C422ENT ASSETS:

The assets of the b"siness in the for* of cash- $ebtors ban+ balances- bill recei)able an$ stoc+ are calle$ c"rrent assets

as the! can be realise$ ithin an operating c!cle of one !ear to $ischarge liabilities

FICTITIO4S ASSETS: Fictitio"s assets are not real assets# Past acc"*"late$ losses or e'penses hich are capitalise$

for the ti*e being- e'penses for pro*otion of organisations 1preli*inar! e'penses3- $isco"nt on iss"e of shares- $ebit

balance of profit an$ loss acco"nt etc# are the e'a*ples of fictitio"s assets#

5ASTIN, ASSETS: These assets are also calle$ $epleting assets# Assets s"ch as *ines- Ti*ber forests- ("arries etc#

hich beco*e e'ha"ste$ in )al"e b! a! of e'ca)ation of the *inerals- c"tting of oo$ etc# are +non as asting

assets# S"ch assets are "s"all! nat"ral reso"rces ith ph!sical li*itations#

CONTIN,ENT ASSETS: Contingent assets are assets- the e'istence- )al"e possession of hich is base$ on

happening or otherise of specific e)ents# For e'a*ple- if a b"siness fir* has file$ a s"it for a partic"lar propert! no

in possession of other persons- the fir* ill get the propert! if the s"it is $eci$e$ in its fa)o"r# Till the s"it is $eci$e$-

it is a contingent asset#

LIABILITIES:

A liabilit! is an a*o"nt hich a b"siness fir* is 6liable to pa!7 legall!# All the a*o"nts hich are clai*s b! o"tsi$ers

on the assets of the b"siness are +non as liabilities# The! are cre$it balances in the le$ger# Liabilities are classifie$into fo"r categories as gi)en belo#

O5NE28S CAPITAL: Capital is the a*o"nt contrib"te$ b! the oners of the b"siness# In a$$ition to initial capital

intro$"ce$- proprietors *a! intro$"ce a$$itional capital an$ ith$ra so*e a*o"nts fro* b"siness o)er a perio$ of

ti*e# Oner7s capital is also calle$ 6net orth7# Net orth is the total f"n$ of proprietors on a partic"lars $ate# It

consists of capital- profits an$ interest on capital s"bject to re$"ction of $raings an$ interest on $raings# In case ofli*ite$ co*panies- capital refers to capital s"bscribe$ b! sharehol$ers# Net orth refers to pai$ "p e("it! capital pl"s

reser)es an$ profits- *in"s losses#

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LON, TE2/ LIABILITIES: Liabilities repa!able after specific $"ration of long perio$ of ti*e are calle$ long ter*

liabilities# The! $o not beco*e $"e for pa!*ent in the or$inar! 6operating c!cle7 of b"siness or ithin a short perio$

of li*e# E'a*ples are long ter* loans an$ $ebent"res# Long ter* liabilities *a! be sec"re$ or "nsec"re$- tho"gh

"s"all! the! are sec"re$#

C422ENT LIABILITIES: Liabilities hich are repa!able $"ring the operating c!cle of b"siness- "s"all! ithin a

!ear- are calle$ short ter* liabilities or c"rrent liabilities# The! are pai$ o"t of c"rrent assets or b! the creation of other

c"rrent liabilities# E'a*ples of c"rrent liabilities are tra$e cre$itors- bills pa!able- o"tstan$ing e'penses- ban+

o)er$raft- ta'es pa!able an$ $i)i$en$s pa!able#

CONTIN,ENT LIABILITIES: Contingent liabilities ill res"lt into liabilities onl! if certain e)ents happen#E'a*ples are: Bills $isco"nte$ an$ en$orse$ hich *a! be $ishono"re$- "npai$ calls on in)est*ents#

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