Classification of Assets

 Classification of Assets These assets may be broadly be classified as follows: 

(1) Fixed Assets : 

It refers to those assets which have been purchased by the enterprise for long term use and not for resale in the ordinary course of business. 

The benefit from fixed assets is derived over a longperiod. 

Fixed assets may be classified as follows: (a) Tangible fixed assets : 

It refers to those fixed assets which can be touched and seen. These may include movable assets (such as vehicles, equipments, machinery); immovable assets (such as land and building); wasting assets (such as mines, oil wells). 

(b) Intangible fixed assets: 

It refers to those fixed assets which cannot be touched and seen. These are usually the rights to use, produce or provide the goods or services. For example, goodwill, patent rights, copyright, trademark, franchises etc. 

(2) Current Assets : 

Current assets are those assets which are held: (a) in the form of cash; (b) for their conversation into cash, as early as possible ( usually within one year), and (c) for their consumption in the production of goods. For example, Cash in hand, Cash at bank, Stock of finished goods, Debtors, Bills receivable, Stock of raw materials etc.

(3) Fictitious Assets : 

It refers to those assets which do not have any physical form and have no relisable value. Such assets can not be converted into cash. 

Those are shown as assets because of their non-recurring nature. All non-recurring payments are shown as assets. 

For example, expenses incurred before the formation of company (called pre|iminary expenses), ‘expenses on issue of shares or debentures' by the companies, discount of shares or debentures, underwriting commission etc.