Chapter 4, Problem 4.10EX

To determine

Classification of Assets

Asset: Assets refer to the resources owned by the business, which are utilized in the course of the business to generate revenue.

In accounting, the assets are classified into two categories:

Current Assets: Current assets are the assets that are easily convertible to cash within a year of business operations. For example, cash and cash equals, Account receivables, Inventories, Prepaid Expenses.

Non-current Assets: It indicates to the assets otherwise known as fixed assets, that are held by the concern for more than one year and are not meant to be sold in the near future rather held to generate profits. It is classified into two categories:

• Intangible Assets: It refers to the assets that have physical existence that can be seen, felt and touched. For example, property, furniture, and machinery.

• Tangible Assets: It refers to the assets that does not have any physical existence and cannot be seen, felt or touched. For example, patents, copyrights, and goodwill.

To Identify: The following items as (a) current asset or (b) property, plant and equipment.