Principles Of Accounting / Semester 2nd / GPGJC

Assets, Liabilities, Equity Expenses, Revenues, Cash Flows

Assets
In financial accounting, assets are economic resources. Anything capable of being owned or
controlled to produce value is considered an asset. Simply stated, assets represent value of
ownership that can be converted into cash.
Classes of Assets
Two major asset classes are intangible assets and tangible assets. Intangible assets are
identifiable non-monetary assets that cannot be seen, touched, or physically measured, are
created through time and effort, and are identifiable as a separate asset. Tangible assets contain
current assets and fixed assets. Current assets include inventory, while fixed assets include such
items as buildings and equipment.
Liabilities
A liability is an obligation of an entity arising from past transactions, the settlement of which
may result in the transfer of assets, provision of services, or other yielding of economic benefits
in the future. A liability is defined by the following characteristics:
1. Any type of borrowing from persons or banks for improving a business or personal income,
2. A responsibility to others that entails settlement by future transfer of assets, provision of
services, or other transactions,
3. A responsibility that obligates the entity to another, leaving it little or no discretion to avoid
settlement, or
4. A transaction or event obligating the entity that has already occurred.

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