UNCERTAINTY = ESTIMATION

BRINGS VALUE TO THE OWNER

OR TO THE BUSINESS WHETHER
DIRECTLY OR INDIRECTLY

VALUE OF SOMETHING
IS NOT THE SAME AS
YOU PURCHASED IT.

USEFUL ECONOMIC LIFE –

HOW LONG AN ASSET
REMAINS USEFUL TO THE
OWNER OR A BUSINESS
(ESTIMATE)
DEPRECIATION VALUE
 WHEN PREPARING FINANCIAL EXAMPLE: WHEN A
STATEMENTS, PRIORITIZE
BUSINESS RENTS/LEASE A
ECONOMIC SUBSTANCE OF THE
TRANSACTION OVER IT’S BUILDING FOR 60 YEARS
LEGAL FORM AND THE USEFUL
ECONOMIC LIFE OF THE
BUILDING IS 65 YEARS
(ASSET)

BUSINESS IS A LESEE OF THE

BUILDING (LIABILITY)
 OFTEN
ARRANGED IN LIQUIDITY - HOW QUICKLY
ORDER OF
YOU CAN TURN ASSET
LIQUIDITY
INTO CASH
ASSET SECTION LIST ALL DIFFERENT TYPES
OF ASSETS THE BUSINESS OWNS OR
CONTROLS
CURRENT ASSETS – ASSETS THAT CAN BE
CONVERTED INTO CASH OVER A
SHORTH PERIOD OF TIME TYPICALLY
WITHIN A YEAR. COMMON EXAMPLES
ARE CASH, ACCOUNTS RECEIVABLE
AND INVENTORY
BY SELLING INVENTORY THE
BUSINESS WILL HAVE ACCOUNTS
RECEIVABLE AND WILL THEN
BECOME CASH. CASH IS THE
MOST LIQUID ASSET.
OTHER EXAMPLE OF CURRENT
ASSETS ARE PREPAYMENT AND
SHORT-TERM INVESTMENTS
 NON-CURRENT ASSETS – LONG TERM
ASSETS THAT ARE USED IN OPERATIONS
TO GENERATE PROFIT AND CAN’T EASILY
BE CONVERTED INTO CASH. 3
CATEGORIES ARE LONG TERM
INVESTMENT, TANGIBLE ASSETS AND
INTANGIBLE ASSETS
EXAMPLE OF TANGIBLE ASSETS
ARE LAND AND BUILDINGS OR
PPE (PROPERTY, PLANT AND
EQUIPMENT), (FURNITURES,
MACHINERIES AND CARS.
INTANGIBLE ASSETS INTELLECTUAL
PROPERTY, PATENT, ROYALTY
RIGHTS, TRADEMARKS,
COPYRIGHT, GOODWILL