Meaning of assets, in this clip we are going to talk about
the meaning of assets, it is very important for any
accountant to have a crystal clear meaning of an asset
Because if you look at the balance sheet, one side is full
of assets, debit is for assets, there is a deep connection
between debit and assets, so today let's understand the
meaning of assets and what is an asset
If I say in one word, the money that will come to pay off
the liabilities for the business is an asset.
Assets means the things that will earn money, for example,
we have machinery, we will produce goods from the
machinery, we will sell those goods, money will come from
there, machinery is an asset
With that money, the business will be able to pay off its
debt, business has nothing of its own, business has nothing
of its own, everything is foreign
Business and owner are considered separate entities, but
the money that the owner has invested, capital is also a
liability for him, that is also written on the liability
side of the business balance sheet, capital money
You know this very well, so the business has to take from
one hand and give from another hand, assets means money
comes from here and there so that the business can return
its liabilities, current and non-current, and the money of
the owners
Nothing remains with the business, nothing remains, it
takes from one hand and gives from another hand, to pay off
liabilities and capital, money comes from wherever it
comes, it is called assets
These are the properties owned by the business which are
used to carry out the business operations and earn
operating revenue for the business
Assets means those who earn money for the business as
operating revenue, so that the expenses of the business can
run and the liabilities of the business can be paid off
It can be classified into non-current, current, and
fictitious assets, there are three types of assets, one is
non-current assets, one is current assets, and one is
fictitious assets
Many of you may not have heard this before, fictitious
assets, keep this in mind as well, what is the meaning of
non-current assets?
Non-current assets means the things you have bought to use
in the business, like I just gave you an example of
machinery
You will not sell the machinery, I have told you the
meaning of assets, the things you have bought to use in the
business, you will pay off the liabilities
But what is machinery? Machinery is bought and kept with
you, it is not sold, that you bought the machinery for 1
lakh, sold it for 1 lakh 20 thousand and earned 20 thousand
rupees, with which you will pay off all the liabilities
No, no, no, no, listen carefully, I am saying that assets
are non-current, the things you buy and use to earn money
Like you buy machinery, use it to produce goods and sell
goods to earn money, the assets that are helping you to
earn money are called non-current assets
Let me tell you one more feature of non-current assets,
their life is more than 12 months, like furniture, once you
buy it, it lasts more than 12 months, you buy it to use it
in the business
See how much furniture is kept here, chair, camera, sofa,
table, this table, Almera in front, there are many things
kept above
Like a building, we are sitting here, we are not selling
the building, we are sitting in it and doing business, we
are earning money from here, the money that will come will
help us
So all these assets that help us to earn money by staying
in the business are called non-current assets
Let's read the definition of non-current assets
These are used for carrying out normal business operations
and are held in the business not for the purpose of
reselling it, but to increase the earning capacity of the
business
Non-current assets are those that are kept in the business
not for the purpose of reselling, not to sell, but to use,
to earn money and give
Then some more things are written in front of us, like
these fixed assets, you ignore what is written here,
because non-current assets and fixed assets are the same
thing
Non-current assets and fixed assets are the same thing,
both do not need to be read separately, it is also written
in this
Yes, whether you call it non-current assets or fixed
assets, they have some types, there are two types, there
are two types of non-current assets or fixed assets
Tangible non-current assets and intangible non-current
assets, in other words, tangible fixed assets and
intangible fixed assets
The example I gave you now, machinery, building, furniture,
these are all examples of tangible fixed assets
Sir, what does tangible mean?
Which we can touch and which we can see, they are called
tangible
So such assets that you are using in the business, they are
earning money for you on a regular basis and you can touch
and see those assets
They have become tangible fixed assets or tangible
non-current assets
And there are some such assets that are in the business,
they are earning money for you, you are not selling them,
you are using them and you can't even touch them and can't
even see them
They are called intangible non-current assets or intangible
fixed assets
Sir, which are they?
For example, goodwill, goodwill means your brand value in a
way
Customers come to you by your name, there are more
businesses like you around, more services like you, more
shops are open, but people come to you to do that work
Because they are satisfied with your effort, your customer
service, in the last few years you have made your goodwill
such that you earn extra money from other people
So that thing which is made by your name, you can't see it,
you can't sell it, you can't see it, you can't touch it
But yes, there is an image in people's mind that you go
there, the work is good there
People close their eyes and come to you
If anyone has any problem, they say, go to that shop, go to
that business, go to that office, that thing will be solved
there, you don't have to go to anyone else
This is the fact that an unknown person came to the market
today
He said that I have to do this work, there are four people
in the market to do this work, from whom should I get it
done?
He asked many people and everyone gave the same advice that
if you want to get work done without any worries, then go
to this person
This is called goodwill, this is called goodwill
So that thing is also earning money for you, which is your
business, which you have made efforts and earned customers
You are also earning from that, people are coming to you by
your name, but you can't touch that thing, you can't see it
So that thing is a non-current asset, but which non-current
asset is it?
Tangible non-current asset, intangible non-current asset
Which you can't touch, you can't see
Now next we come to the example of current asset
See, we saw that asset, then non-current asset in the
asset, two examples of non-current asset, tangible and
intangible
Now let's see current asset and fictitious asset in the
asset
Assets of three types, non-current, current, fictitious
Non-current assets are of two types, tangible and intangible
There is no type in current assets and there is no type in
fictitious assets
Let's read current assets
These are those assets which are held on short-term basis
for the purpose of converting them into cash within a year
such as debtor, stock, etc
The meaning of current asset is very simple
Which you have kept to sell in your business
For example, stock goods
You buy it with one hand and sell it immediately
You buy it in 10 and sell it in 12 and earn 2 rupees
Or such assets which can be converted into cash very quickly
Such as cheque, such as your cash balance which is already
converted into cash
Such as bills receivable, such as debtors
From whom money comes very quickly
Such as those debtors to whom you have given time on a
three-month loan
Money will come in three months
Within a year, if something is converted into cash, then it
will become a current asset
Such as debtors for three months
You have given time, money will come in three months
In three months, it will be converted into cash
Debtors will give you money
Such as stock
What you buy, it is sold within a maximum of 12 months
Yes sir, it is true
It is sold within a maximum of 12 months
You bought the stock
So that thing will become a current asset for you
Whatever property, whatever thing
Sold within 12 months
Or give us the money of your value
That thing will become a current asset
Prepaid expenses are also classified as current assets
Because although they cannot be converted into cash
But a part of their benefit is available for next
accounting year
A separate example is written
Prepaid expenses
Now I told you
Anything that is converted into cash
It will become your current asset
Anything that is converted into cash
Within a year
It will become your current asset
But there is a thing called prepaid expense
Which is not converted into cash
But still we consider it as a current asset
What is the meaning of prepaid expense?
I paid the insurance premium for 15 months
For 15 months
12 months of this year
And 3 months next year
Total for 15 months
I paid Rs 15000 as insurance premium
For 1 month it was Rs 1000
The entire current year 12 months became Rs 12000
And the Rs 3000 which I paid
For the next 3 months
That is for the next 3 months
For the next 3 months of the year
Which I paid Rs 3000
That Rs 3000 is called prepaid expense
That expense which I paid in advance
It was not related to this year
But I paid that Rs 3000
That is called prepaid expense
So we will not get that Rs 3000 back
That Rs 3000 will not be converted into cash
But in return we will get benefits
We will get service
For 3 months
For the next 3 months
We will be covered in insurance
That is why that thing will become a current asset
So if we get money within 12 months
Still that thing is a current asset
And not getting money
If we get service for 12 months
Or less than that
Still that thing will become a current asset
Now listen to the crux of a current asset
Within 12 months
That thing will go
And we will get money in return
Or for 12 months
Or less than that
That thing will provide us some services
Some benefits And fictitious assets are those assets which
are neither tangible nor intangible, these are losses not
written off, in which they are incurred but in more than
one accounting period.
For example, you must have seen that if there is a loss in
your balance sheet, then the negative balance of profit and
loss is written on the asset side.
The negative balance of profit and loss is written on the
asset side, because there is a rule, debit all expenses and
losses.
And we write all the debit items on the asset side.
We write all the debit items on the asset side.
But in reality, it is not an asset, it is not a property,
it is not a money which we will pay liabilities.
It is written only because there is a rule, debit all
expenses and losses.
That's why it is written on the asset side, when it is not
a real asset.
Such assets are known as fictitious assets, which will not
give you any earnings, but the balance sheet is on the
asset side.
For example, the negative balance of profit and loss is
written on the asset side.
So friends, this was the discussion on assets.
In the next clip, we will discuss something else with you.