It is very rare to find any company without an asset account when it is the core fuel for the company to run its business. In any Balance Sheet, the structure is always: assets, liabilities and equity. Assets are the resources with an economic value that your company has and controls with the assumption that it will offer a future advantage. Instances of assets include your machinery, trade receivables, and investment etc.
Below are some of the asset classes that you would normally see:
Property, plant and equipment
This class of asset is previously known as the fixed asset and now termed differently follow the changes in the Accounting Standard. Property, plant and equipment consist of all the “long-term” physical assets owned by the company such as machinery, office space, motor vehicle etc.
Intangible assets as its name suggested, is not assets that is visible. An example of this type of asset will be the goodwill of a company, copy right or patent for its products. An experience accountant in Johor Bahru will always tell you: in spite of the absence of its physical appearance, intangible asset is also something to be accounted for given its nature of bringing in future economic benefit to the company.
Inventories are the unsold products that a company sell to their clients and these are assets to the company as it will attach economic benefit return when it is eventually sold, usually at a higher value than the cost of purchase.
As a result of the inventories sold, your company probably received cash immediately if it is a cash term transaction but more often, credit term is offered to the customers and those payment that is expected to be received is called the accounts receivables or trade debtors.
Cash and cash equivalent
When the actual cash is received from the debtors, the receivable in a way “transformed” into cash (another asset type). Cash and cash equivalent consist of undeposited cheques received, cash at bank or short-term fixed deposit in bank. This is an important concept to know when it comes to the preparation of cash flow statement.
Understanding different classes of assets that is prevailing is essential to properly manage your company assets, although you can engage an accounting firm in Johor Bahru and let the experts take care for you. This is especially true when more advance technique is employed to analyse the company’s Balance Sheet.