Accounting Acer Series 2
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Today, we talk about "Assets" , the 1 out of 5 important elements in accounting basics.
Some of the basic accounting terms that you know include, revenue, expenses, assets, liabilities, income statement, balance sheet, and statement of cash flow.
Accounting equation:
Assets: Liabilities + *Owner’s Equity
*Owner’s equity = Share capital + Retained Profits
Retained Profits = Cumulative of revenue – Expenses
So, what is an asset?
In accounting, assets are the resources that a company requires in order to run and grow its business. Which are resources owned and controlled by the company. Assets are divided into two categories: Current Assets and Non-Current Assets.
Current Assets
Current assets are the resources that a business requires to run its day-to-day operations and pay its current expenses, and they are called short-term assets since they typically converted to cash within a firm’s fiscal year. Typically, current assets are listed at their current or market value on the balance sheet.
Current assets may include items such as:
Cash and cash equivalents
Account receivable
Inventory
Prepaid expenses
Non-Current Assets
Non-current assets are a company’s long-term investments that have a useful life of more than one year. It cannot be converted to cash easily. They are required for the long-term needs of a business and include things like land and heavy equipment.
Non-current assets can be both Tangible and Intangible assets.
Tangible assets include property, plant and equipment.
Intangible assets are non-physical assets, such as patent and copyrights. As they provide value to a company but cannot be converted.
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