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Classification of Assets-Notes

Assets are resources owned by a business that are classified as either current or non-current. Current assets are easily converted to cash within a year and include inventory, while non-current assets like property are used over multiple years. Liabilities are debts owed, classified as either current if due within a year like payables, or non-current like long-term loans. Capital represents the owner's equity claim on the net assets of the business.

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232 views1 page

Classification of Assets-Notes

Assets are resources owned by a business that are classified as either current or non-current. Current assets are easily converted to cash within a year and include inventory, while non-current assets like property are used over multiple years. Liabilities are debts owed, classified as either current if due within a year like payables, or non-current like long-term loans. Capital represents the owner's equity claim on the net assets of the business.

Uploaded by

fathimath ahmed
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Classification of Assets, Liabilities and Capital

Assets are resources owned by a business that have monetary value.

Assets

Non-current Assets Current Assets

 Acquired for use in the business and  Cash or items which can be easily
not for resale. converted to cash.
 Have physical existence. (Can see  Bought for resale and not for use in the
and touch) business. (inventory)
 Can be used for more than one  Useful life is less than one financial
financial year. year.
 Examples:  Examples:
Land and buildings, motor vehicles, Inventory, trade receivables, cash at
machines, furniture, fixtures, bank, cash in hand etc.
premises, computer etc.

Liabilities are debts that a business owes to external parties (other than the owners).

Liabilities

Non-current Liabilities Current Liabilities

 Debts owed for more than one  Debts owed for less than one financial
financial year. year.
 Examples:  Examples:
Long-term loans, mortgages etc. Trade payables, short-term loans,
bank overdraft etc.

Capital is the money invested by the owner to the business. It represents the owner’s claim upon a
business’ net assets (assets minus liabilities). Another name for capital is owner’s equity.

 Trade receivables: people who owe money to the business for goods sold on credit.
 Trade payables: people to whom business owes money for goods purchased on credit.

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