Slide 1 This video will discuss what an asset is, how to recognise it and how to record an asset.

A business purchases a delivery vehicle for R500 000. The business wants to account for the
Slide 2 purchase of this delivery vehicle in its accounting records. Their accountant told them that the
delivery vehicle is an asset of the business. How does the accountant know that it is an asset?
Slide 3 What is an asset? – In simple terms, an asset is a possession of an individual or a business. In
terms of IFRS an asset is defined as a present economic resource controlled by the entity as a
result of past events.
What is IFRS – IFRS is the acronym for “International Financial Reporting Standards”
What is an economic resource? – An economic resource is a right that has the potential to produce
economic benefits.
What is a resource? – A resource is something that is readily available and that helps a business to
function effectively.
Slide 4 What is an economic benefit? – An economic benefit is a benefit that can be quantified in terms of
money generated such as income or revenues etc.
An economic benefit can also be money saved when costs are reduced.
What does it mean to be controlled?

- The delivery vehicle has been bought by the flower shop (the business).
- The owner of the flower shop can use the delivery vehicle as he/she wants to, i.e. it can painted,
driven or be sold.
- The delivery vehicle is being used to deliver the flowers of the flower shop

Therefore, the flower shop (the business) has control over the delivery vehicle.
Slide 5 The flower shop (the business) will use the delivery vehicle to deliver flowers.
 Every time the flower shop delivers the flowers, the flower shop s earns money.
The customers expect the flower shop to deliver the flowers they buy from the flower shop.
The delivery of the goods is a benefit to the business as it helps the business earn income.
Slide 6 Assets are divided into non-current assets and current assets.
Current assets are expected to be converted into money within twelve months after the statement
of financial position date. A non-current asset is an asset other than a current asset. Examples of
current assets are inventory, cash and debtors or trade receivables.
Slide 7 Non-current assets are the assets of a business that have an expected useful life of longer than one
year. Examples of non-current assets are buildings, computer equipment and office furniture
Slide 8 What is the recording of a transaction?
The purchase of the asset will be recorded in the accounting records of the business.

The business paid money for the asset i.e. R500 000.
Therefore, the asset has economic value.
The business owns or controls the asset with the expectation that the asset will provide a future
benefit for the business.
Slide 9 The purchase of the delivery vehicle for R500 000 cash will be recorded in the cash payments
journal (CPJ) as follows:

In the detail of payments column the name of the supplier of the delivery vehicle will be entered
(SA motor vehicles).
The amount of R500 000 paid for the asset will be entered in the “Sundries” column (This is the
debit side of the transaction).
Then –
The amount of R500 000 paid for the asset will be entered in the “Bank” column (This reflects the
credit side of the transaction).
 The business has paid R500 000 for a delivery vehicle.
The asset - delivery vehicle will increase i.e. the account is debited, and
The asset – bank will decrease i.e. the account will be credited.
Slide 10 The purchase of the delivery vehicle for R500 000 credit will be recorded in the general journal
(GJ) as follows:
In the detail column the asset - the delivery vehicle will be entered first and the R500 000 will be
entered under the DEBIT COLUMN.
Next -
In the detail column the liability* will be entered (by indenting the wording slightly) and the
R500 000 will be entered under the CREDIT COLUMN.

(*The liability is whoever the money is owed to for the delivery vehicle – the supplier of the motor
vehicle or a Bank will be entered)
The narration will also be entered under the account names i.e. Purchase of motor vehicle on credit

Slide 11 The journals will be posted to the general ledger as follows:

The motor vehicles account will be debited by entering the amount in the left-hand side of the T-
account. (The DEBIT side)
For the CASH purchase the opposite entry will be:
The Bank account will be credited by entering the amount on the right-hand side of the T-account.
(The CREDIT side).
Slide 12 For the CREDIT purchase the opposite entry will be:
The long-term liability account will be credited by entering the amount on the right-hand side of the
T-account. (The CREDIT side).
Slide 13 You should now be able to record the cash purchase or the credit purchase of an asset in the
journals of a business.