Thomson Medical Centre

Thomson Medical Centre

What are the main characteristics of assets from an accounting prospective?

The asset consists of all resources available to the entity to accomplish its purposes, which should represent reasonably expected future economic benefits controlled by an economic entity from transactions or events held, identifiable and quantifiable in monetary terms. The characteristic of assets are as follows:

Assets are categorized as resources, where they aid the day to day operations of the business

Assets are usually Identifiable and quantifiable, However if we talk about intangible assets, then they do not have this feature.

There is a possibility that future economic benefits can be generated from assets, as it allows flow to the entity

Assets are reliably valued

When we talk about assets, the entity must have control over future economic benefits reasonably

Assets comes from past transactions

The assets are classified as "current" and "non-current". What is the difference between these two categories?

For a better understanding and analysis of assets, they are classified according to their ability to become effective, or as the destination or use of it. In presenting the financial statements, the assets are classified according to whether they are current or noncurrent. Any asset that is likely to become cash within or less than one year, in commonly known as a current asset. It is common to any asset that can be sold in a short time and if they are not, then they are called non-current assets. In order to become effective, the noncurrent asset requires a longer period than one year. We see that the classification of the asset depends on the expected time to complete it. The classification of assets in this way, it is important to measure the liquidity of the company, its ability to cover short-term payments. Hence, the working capital is based on current assets. A company where the majority of its assets are converted into cash, in installments over one year, is a company that will struggle to meet their obligations. The intangible assets are generally non-current, since by their nature are not intended for sale. Valuations are at higher market value of fixed assets and investments, therefore, the valuations for fixed assets are current assets, and valuations of the equity investments will also be non-current assets. In the case of temporary investment valuations could be classified as current, although it would be unusual.

What do you notice about the order in which items appear in the "current" and "non-current categories in the Balance Sheet? Comment

It is true that a certain order is followed while listing the items in current and noncurrent assets categories of the Balance Sheet. If we talk about the current Assets, it can be observed that they are listed down in the Balance Sheet according to their nature of liquidity, where the least liquid current assets is listed first on the list followed by other high liquidity current assets. On the other hand, if we analyze the pattern or the order in which the items in noncurrent current assets section of the Balance sheet appears, it can be observed that ...