Pestel Analysis on Water Industry

Topics: Generally Accepted Accounting Principles, Asset, Balance sheet Pages: 10 (2943 words) Published: May 4, 2013
Assets in accounting
In the financial accounting sense of the term, it is not necessary to be able to legally enforce the asset's benefit for qualifying a resource as being an asset, provided the entity can control its use by other means. The accounting equation relates assets, liabilities, and owner's equity: Assets = Liabilities + Stockholder's Equity (Owner's Equity) Assets = liabilities + Capital

liabilities = Assets - Capital
Capital = Assets - liabilities
That is, the total value of a firms Assets are always equal to the combined value of its "equity" and "liabilities." The accounting equation is the mathematical structure of the balance sheet. Assets are listed on the balance sheet. In a company's balance sheet certain divisions are required by generally accepted accounting principles (GAAP), which vary from country to country.[8]Assets can be divided into e.g. current assets and fixed assets, often with further subdivisions such as cash, receivables and inventory. Assets are formally controlled and managed within larger organizations via the use of asset tracking tools. These monitor the purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non-physical assets. [edit]Current assets

Main article: Current asset
Current assets are cash and other assets expected to be converted to cash or consumed either in a year or in the operating cycle (whichever is longer), without disturbing the normal operations of a business. These assets are continually turned over in the course of a business during normal business activity. There are 5 major items included into current assets: 1. Cash and cash equivalents — it is the most liquid asset, which includes currency, deposit accounts, and negotiable instruments (e.g., money orders, cheque, bank drafts). 2. Short-term investments — include securities bought and held for sale in the near future to generate income on short-term price differences (trading securities). 3. Receivables — usually reported as net of allowance for noncollectable accounts. 4. Inventory — trading these assets is a normal business of a company. The inventory value reported on the balance sheet is usually the historical cost or fair market value, whichever is lower. This is known as the "lower of cost or market" rule. 5. Prepaid expenses — these are expenses paid in cash and recorded as assets before they are used or consumed (a common example is insurance). See also adjusting entries. Marketable securities Securities that can be converted into cash quickly at a reasonable price The phrase net current assets (also called working capital) is often used and refers to the total of current assets less the total of current liabilities. [edit]Long-term investments

Often referred to simply as "investments". Long-term investments are to be held for many years and are not intended to be disposed of in the near future. This group usually consists of three types of investments: 1. Investments in securities such as bonds, common stock, or long-term notes. 2. Investments in fixed assets not used in operations (e.g., land held for sale). 3. Investments in special funds (e.g. sinking funds or pension funds). Different forms of insurance may also be treated as long term investments. [edit]Fixed assets

Main article: Fixed asset
Also referred to as PPE (property, plant, and equipment), these are purchased for continued and long-term use in earning profit in a business. This group includes as an asset land, buildings,machinery, furniture, tools, IT equipment, e.g., laptops, and certain wasting resources e.g., timberland and minerals. They are written off against profits over their anticipated life by chargingdepreciation expenses (with exception of land assets). Accumulated depreciation is shown in the face of the balance sheet or in the notes. Asset is important factor in balance sheet These are also called capital assets in management accounting. [edit]Intangible assets...
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