In the complex and accelerating world of business, accounting is one of the essential elements that ensure the stability and success of organizations. It is the common language that translates the details of financial and economic operations into the highest forms of transparency and financial reporting. At the heart of accounting lies the concept of assets, which is the backbone of an effective accounting system. Assets are defined as the financial and material resources that an organization possesses that contribute to achieving its goals. By understanding them and managing them properly, businesses can build strong foundations that help them compete in the business market and include a variety of elements, from cash and amounts available in bank accounts to real estate, buildings, equipment, and vehicles to financial rights and investments.
The concept of assets can be defined as items of value owned by a company or individuals, and it also means the rights and property of a company. Assets include economic resources, tangible and intangible items that the company owns, which can be converted into cash to pay off debts or cover business and economic expenses.
Assets are also a group of future benefits that the company can obtain as a result of financial events and changes, and their value is recorded in the financial statements. This is an important condition that reflects the transparency and credibility of these lists. When the financial statements are transparent and reliable, this reflects the strong financial position of the company.
Recording and analyzing assets in the corporate balance sheet is vital to understanding and evaluating the financial position and economic performance of the company, as the concept of assets is an essential component of the budget structure and represents the resources that the company owns and uses to achieve its business objectives. The types of assets include the following:
It is what is expected to be converted into cash within a financial or operating cycle. It is an important part of the balance sheet, as it represents the liquidity available to the company and its ability to meet its short-term financial obligations. The value of these assets is usually higher than that of fixed assets due to the ease of converting them into cash. .
These assets are physical property that cannot be easily converted into cash because they are used in the day-to-day operations of the business, are essential to running the business and generating income, are an essential component of the production process, are used for long periods of more than at least one year, and over time, their value can decline due to consumption and obsolescence.
These assets represent a capital investment for the company and contribute to achieving its long-term goals.
The concept of tangible assets can be classified into several categories, such as:
Tangible assets can be subject to depreciation over time, and companies must monitor and maintain them regularly. Changes in the market value of tangible assets can affect the company’s ability to obtain additional financing, such as bank loans.
The concept of intangible assets is an important part of the value of companies and institutions, as it reflects the unique capabilities and knowledge that they possess and can protect the company from competition and give it a competitive advantage. Companies must protect their rights in these areas, such as registering trademarks and protecting software rights.
They are intended to increase a company's ability to generate profits and returns and can be vulnerable to market fluctuations and value changes; therefore, companies must manage them carefully.
The concept of personal assets refers to property that is convertible into cash and is owned by individuals. It can be used to generate profits, increase personal income, finance personal projects, or meet financial needs. It is worth noting that it is important for individuals to carefully manage their personal assets and make the right financial decisions to preserve their values.
Operating assets are essential to facilitating and managing a company's day-to-day operational activities and include a variety of items that help a company generate additional profits and revenues.
The concept of non-operating assets represents items that are not essential to the company's daily operations and operational activities, and although they are not essential to the operational business, they still play a role in managing the company and achieving its strategic objectives.
Current assets are calculated following several main steps, which include the following:
Liquid cash is collected and includes cash in the tank and the company's current accounts. Petty cash expenses that have been paid in advance but have not yet been used must also be counted.
If the organization has 100,000 riyals in cash, 200,000 riyals in current accounts, and 80,000 riyals in petty cash, the total cash in current assets will be 380 thousand riyals.
All investments that can be converted into cash in a short period of time should be collected, such as:
If the institution owns 60 thousand riyals of shares and 40 thousand riyals of certificates of deposit, the total short-term investments will be 100 thousand riyals.
All receivables and amounts owed to the company from customers must be collected, whether they have already been collected or not yet.
The value of inventory at the end of the period is calculated by the following equation:
Value of inventory at the beginning of the period + net purchases = cost of goods sold.
If the value of the inventory at the beginning of the period is 200 thousand riyals, the net purchases for the period are 300 thousand riyals, and the cost of goods sold in the period is 150 thousand riyals, then the value of the inventory at the end of the period will be 350 thousand riyals.
Any other current assets of the company, such as other financial assets and financial receivables, must also be accounted for.
To calculate total current assets, you add all the previous elements together, which can be represented by the following equation:
Total Current Assets = Cash + Total Short-Term Investments + Current Accounts Receivable + Inventory + Other Assets + Prepaid Expenses.
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The difference between the concepts of current assets and fixed assets is an important topic in accounting and may cause confusion for some. So here is the difference between them, as follows:
They are assets that can be exchanged for cash within a period not exceeding one year. These assets are used to pay the company’s current or immediate obligations, and they include many elements, such as:
Current assets are valued based on current market prices, and inventory may occasionally be revalued, but in general, the concept of current assets is not subject to revaluation.
They are assets that cannot be exchanged for cash within one year and are used to meet the company's long-term or future needs. They include fixed assets, such as:
Fixed assets are valued based on their original cost after subtracting depreciation from a tax perspective. When the market value of a tangible asset falls below its book value, the property, appliances, and equipment are re-evaluated.
How to add assets in the Qoyod program is an important process in accounting that aims to record fixed assets in the company’s records. Here is the way to do that:
It is important to ensure that the entries in the manual entries are correct because they affect the company’s financial statements, and in the event that the concept of fixed assets is sold, they will be transferred to the income statement, and this will be reflected in the financial statements.
Accountants and users must pay attention to details and ensure that the correct information is entered in manual entries. This ensures the accuracy and reliability of accounting data and contributes to making the correct financial decisions.
The concept of assets in accounting is one of the main elements that contribute to understanding and analyzing the financial position of any economic entity. It represents the basic basis on which accounting work is built, as it reflects the value of the financial and material resources that the company possesses and uses to achieve its goals and includes cash assets, investments, lands, buildings, equipment, inventory, receivable claims, and many other elements that the company owns. Asset management requires accountants and financial managers to carefully and continuously monitor assets, including recording, evaluating, storing, and disposing of them when needed.
You must put assets at the forefront of accounting thinking and give them the necessary attention in all aspects of financial work through the use of the Qoyod program. It is worth noting that the program also offers all its clients: electronic invoice systems, as well as point-of-sale systems, warehouses, customers, etc., all of that. At the best prices.
Dear reader, after knowing what the concept of assets is and its types, try Qoyod now for free for 14 days, and you will not believe what will happen next.
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