Identification of Types of Assets And Liabilities - SS1 Accounting Lesson Note
Assets and liabilities can be classified into different types, based on their nature, duration, and other characteristics. Understanding the different types of assets and liabilities is important for financial management, as it helps companies make informed decisions about their investments, financing, and risk management strategies.
Types of Assets:
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Current Assets: These are assets that can be easily converted into cash within a year, such as cash, accounts receivable, and inventory.
Fixed Assets: These are long-term assets that a company owns and uses to generate income, such as property, plant, and equipment.
Intangible Assets: These are assets that have no physical form, such as patents, copyrights, and trademarks.
Financial Assets: These are assets that represent investments or financial claims, such as stocks, bonds, and loans.
Types of Liabilities:
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Current Liabilities: These are short-term debts that a company owes and must pay within a year, such as accounts payable, taxes payable, and short-term loans.
Long-term Liabilities: These are debts that a company owes and must pay back over a period of more than one year, such as long-term loans and bonds.
Contingent Liabilities: These are liabilities that may arise in the future, depending on the outcome of certain events, such as legal disputes or warranty claims.
Capital Liabilities: These are liabilities that represent the capital that a company has raised from investors, such as equity shares and retained earnings.