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Home Report, Assignment, Case Study and Term Paper Types of Assets: Defination and Classification

Types of Assets: Defination and Classification
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By Ashraful Rasel Published 22 October 2009

In short. assets are divided into the following categories: Current assets (cash and other liquid items). franchise. patents. and real estate. machinery. In the following discussion different types of assets are described including their definition. such as copyright. especially that which could be converted to cash. prepaid and deferred assets (expenditures for future costs such as insurance. From an accounting perspective.• • Report. such as accounts receivable. In short. inventory. it is the opposite of tangible asset. long-term assets (real estate. trademark. or residual value). and retained earnings. such as cash. copyrights. equipment). goodwill). All the tangible assets are described below with examples. . or (4) an assumption. accounts receivable are also usually considered tangible assets for accounting purposes. At first we classify assets into tangible assets and intangible assets. such as a brand. office equipment. a car. An asset can be (1) something physical. in generating income. assets are equal to the sum of liabilities. or patent. securities. it is the opposite of intangible asset. such as goodwill. In accounting. Assets shown on their owner's balance sheet are usually classified according to the ease with which they can be converted into cash. or has use of. Asset: Any item of economic value owned by an individual or corporation. Case Study and Term Paper Unrated Types of Assets: Defination and Classification Asset a most important item of the balance sheet can be classified from different perceptions. trademark. On a balance sheet. (2) an enforceable claim against others. rent. real estate. interest). Examples are cash. accounts receivable. land and building. and which has money value (its cost. market value. Assignment. patent. equipment. Intangible asset: Something of value that cannot be physically touched. plant. such as cash. an asset is something an entity has acquired or purchased. (3) right. and other property. common stock. intangible assets (trademarks. preferred stock. Something valuable that an entity owns. benefits from. book value. Definition and explanation are given below: Tangible asset: Assets having a physical existence. inventory.

it is the exclusive right. or high employee morale. and gives it owner the legal rights to prevent the trademark's unauthorized use. In balance sheets. goodwill appears on the balance sheet of the acquirer in the amount by which the purchase price exceeds the net tangible assets of the acquired company. Patents: Limited legal monopoly granted to an individual or firm to make. Responsibility of identifying. Trademarks are divided into 42 international classes. it is protected only in the class (es) relevant to the business or trade area of the item. useful. almost indestructible except by indiscretion. and (4) Composition of matter: chemical compounds or mixtures having properties different from their constituent ingredients. in some cases such as Coca Cola Co. labels. rests solely with the patent holder. product designs. Whereas a trademark may be registered under multiple classes. or any combination thereof that uniquely identifies a firm and/or its goods or services. Patentable items fall under four classes (1) Machine: apparatus or device with interrelated parts that work together to perform the invention's designed or intended functions. Goodwill: It is an intangible asset which provides a competitive advantage. maps. In the US. a trademark is usually amortized over the life the trademark or 40 years. letters (including emails). words. patents are granted on the 'first to apply' basis. Costs incurred in design and registration of. An invention is patentable if it is novel. or medium. and suing the patent violators. (5) Display or exhibit it in public. Copyrights (©): It is a legal monopoly that protects published or unpublished original work (for the duration of its author's life plus 50 years) from unauthorized duplication without due credit and compensation. and sometimes prevents others from using identical or similar marks. it is assumed value of the attractive force that generates sales revenue in a business. are renewable indefinitely. (3) Make and distribute its copies. motto. mechanical. Although a trademark has no limited term of existence. electrical or other process that produces a chemical or physical change in the condition or character of an item. Distinctive design. and to exclude others from doing so. and WIPO Copyright Treaty) five rights are associated with a copyright: the right to: (1) Reproduce the work in any form. a work must have originality and some modicum of creativity. logo. use. and sell its invention. According to the major international intellectual-property protection treaties(Berne Convention. and not the idea itself. musical compositions. guarantees the item's genuineness. In short. a patent application must disclose all details of the invention so that others can use it to further advance the technology with new inventions. In most of the world. To acquire a valid copyright. articles. (2) Adapt or derive more works from it. however. To receive a patent. and in defending. graphic designs. granted by the government. each class representing similar goods or services. language. trademarks are identified as intangible and. such as a strong brand. to make use of an invention or process for a specific period of time. (3) Process: chemical. (2) affixed to the item sold. In other words. and (3) registered with the appropriate authority to obtain legal ownership and protection rights. patent law provides only means of prosecution and determination of just compensation. In an acquisition. whichever is shorter. These rights are protected worldwide by international intellectual property treaties and may be assigned by their owner to other parties. what is protected under copyright is the 'expression' or 'embodiment' of an idea. or design that legally identifies a company or its products and services. locating. Universal Copyright Convention. Trademark rights are granted usually for 7 to 20 years and. It is built painstakingly over the years generally with (1) heavy and continuous . with a protection period of 7 years (India) to 20 years (European Union). usually 14 years. and non-obvious. it precludes the infringer's defense of lack of knowledge of a trademark claim. Goodwill is an intangible but saleable asset. and adds value to its assets. A trademark must be (1) distinctive instead of descriptive.Trademark (™): A distinctive name. However. are far more valuable than the firm's all other assets. the rights to use it may be lost due to misuse or lack of use. whereas the use of symbol 'TM' does not provide any legal benefit.. reputation. (2) Manufacture: all manufactured or fabricated items. unlike in case of patents. symbols. Copyright covers not only books but also advertisements. and does not apply to factual information. graphics. And. symbol. (4) Perform it in public. they are granted for 17 years on the 'first to invent' basis. lyrics. but not an offense). The term trademark includes the associated term service mark (SM). A copyright is not equivalent of legal-prohibition of plagiarism (which is an unethical and unprofessional conduct. etc.

and furniture. and other assets that could be converted to cash in less than one year. Over time. copyright. prepaid expenses. For many products and companies. (2) Natural resource such as coal. Thus brands help harried consumers in crowded and complex marketplace. words. Non-performing asset: Lease or loan where the (1) lessee or borrower is not making timely payments. this image becomes associated with a level of credibility. Brand: It is an identifying symbol. goodwill may be worth many times the worth of its physical assets. marketable. or fee paid for a license or privilege to use an intellectual property (brand. sign. oil.expenditure in promotion. computed usually as a percentage of revenue or profit realized from the use. subject to depreciation. or mark that distinguishes a product or company from its competitors. in exchange for a fee. extraction. words. Long term asset: These are Balance sheet term for capital assets held for longer than one accounting period (usually a year) and shown at their book value. when it identifies or represents a firm. branding is an essential part of marketing. inventory. A company's creditors will often be interested in how much that company has in current assets. Legal name for a brand is trademark and. since these assets can be easily liquidated in case the company goes bankrupt. Current asset: A balance sheet item which equals the sum of cash and cash. process) or a natural resource (fishing. Goodwill includes the worth of corporate identity. Fixed asset: A long-term. In well established firms. Unique design. In such cases. Wasting asset Accounting: (1) Fixed assets (excluding real estate) that has limited (though not necessarily predetermined) useful life and is. and satisfaction in the consumer's mind (see positioning). real. gas. and is enhanced by corporate image and a proper location. the lesser or lender may . symbol. consideration. or a combination of these. Royalty Compensation. accounts receivable. such as accounts receivable and marketable or equivalently current assets minus inventory are called quick assets. (3) high quality of goods and services. and (4) high quality and conduct of management and employees. quality. timber. hunting. therefore. Usually brands are registered (trademarked) with a regulatory authority and so cannot be used freely by other parties. (2) payments are no longer anticipated or. Its value is not recognized in account books but is realized when the business is sold. inventory. (2) creation and maintenance of durable customer and supplier relationships. that diminishes in value due to depletion. or removal and is. Short term asset: In general. prepaid) and various fixed. Assets are also classified under the following categories: Quick asset: Cash and other assets which can or will be converted into cash fairly soon. mining). GAAP require the firm's purchaser to write off (amortize) the amount paid as goodwill over a period (usually 10 to 30 years) for financial reporting purposes. and is reflected in the firm’s selling price by the amount in excess over the firm’s net. therefore. tangible asset held for business use and not expected to be converted to cash in the current or upcoming fiscal year. In addition. asset with a lifespan of five years or less is called short term asset. by standing for certain benefits and value. current assets are important to most companies as a source of funds for day-to-day operations. such as manufacturing equipment. Franchise: A form of business organization in which a firm which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees)operating under the franchisor's trade name and usually with the franchisor's guidance. ores. long-term assets(such as plant and equipment). it is called a brand. These types of assets are also called plant. subject to amortization. Securities industry: put option or call option whose value expires on a fixed date Operating asset Asset acquired for or used in the income generating operations of the business (such as cash. employed in creating an image that identifies a product and differentiates it from its competitors. (3) maturity date has passed without fulfillment of the agreement. patent.

until the associated service or benefit is received. or taking repossession or foreclosure action. accounts receivable. and marketable (bonds. in the form of cash deposits. accumulated depreciation account that reduces the original cost of an asset to arrive at its book value is a contra asset. or easily accessible. interest.C from Gazipur Cantonment Board College. Deferred asset: Prepaid recurring expense (such as insurance. shares).icio. stamp collection) as opposed to financial assets (such as bonds. notes. demanding the full payment of the balance. Ashraful Rasel H. debentures. Contra asset: It is an asset account that offsets an associated account. View all articles by Ashraful Rasel Spread The Word • • • • • • • • • del. but can neither be used nor sold is called paper asset. Paper asset: Asset (such as obsolete equipment) that is included in the balance. For example. BBA & MBA from Dhaka University major in Accounting and Information Systems. checks.allow some time (typically not exceeding 90days) before asking for additional collateral. Financial asset Money at hand. or rent) carried forward as an asset. buildings. commodity.S. tangible asset (such as valuable antique or art. loans. shares). coins. Real asset: Actual. machinery and it Digg this Furl Reddit Yahoo! this! StumbleUpon Google Bookmarks Live Favorites Technorati Related Articles • • Portfolio Insurance – Dynamic Asset Allocation Strategy Return and risk comparison of financial asset in Bangladesh .

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