ASSETS

A current asset is realizable or consumable with

the normal operating cycle
• Asset is convertible to cash
• Cash equivalent
• or credit
Operating Cycle

• Span of time from the point of • Example of Operating cycle

acquisition of goods
1. Buy goods intended for sale on
• or materials processing up to the cash basis
realization in cash
2. Sale of goods to the customers
• or cash equivalents either on cash basis or credit
3. Collection receivables from
customers
Operating Cycle – Cash converted to goods; goods
become collectibles; collectible converted to cash
Cash in
operation
__________
Receivable
becomes
cash

Product or
Cash
services
converted to
become
products or
receivable
services
Classification of
Assets
CURRENT ASSETS
 ACCOUNTS

The term account refers to a device that summarizes business transactions and events.
The account is labeled with a specific name to identify one from the other.
The name designated to the account which describes its nature is called account title.
CASH – is the account title that describes money, either
in paper or in coins and money substitutes (checks,
postal money orders, bank deposits.

Cash on Hand Cash in Bank

• Kept in the safe vault of the • Deposited in the bank as current

company account
• Cash within the premises of the • Cash deposited in the bank
business
• Business issues checks
• Owner makes investment to the
business
Cash equivalents-short-term investments that are
readily convertible into cash when the need arises

Example of cash equivalents

• Time deposit • BSP treasury • Money market

with maturity bill with instruments
period of three maturity period with maturity
months of three months period of three
months
Petty Cash Fund –represents money placed and
set aside for petty or small expenses
Example of petty cash

• Interest Fund • Dividend Fund • Payroll Fund

Investments in Trading Securities- short term investment in stocks of other
business or other known as Marketable securities are stocks or bonds
purchased by the enterprise and are to be held for only a short span of time
or duration.

They are usually purchased

when a business has excess
cash.
Trade and other
receivables
-the amounts collectible from any of the
following accounts:
 Accounts
Receivable
-represents amount Account Receivable
collectible from customers is an “open account”
to whom sales have been
made or services have been because it is not
rendered on account or supported by a
credit
promissory note.
 Why notes receivable arises?

Notes Receivable
1. Business entities extend credit to
-represents collectibles from the customers by selling goods or services on
account.
customers or clients arising from 2. Providing credit or account to
sale of goods or services which are customers is on of the ways to improve
the operating performance of the
supported by promissory notes company.
3. Attract prospective customers and
retain the old ones.
 • The amount of interest is
computed by multiplying
the principal amount
borrowed, the time period
Interest of the debt or financial
Receivable obligation, and the interest
rate.
-amount of interest • This account title is
collectible on promissory usually used when the
company updates all
notes received from accounts at the end of the
customers and clients. accounting period in order
to reflect or show the
real position of the
business.
 • The cash advances are
deductible against the
salary of the employees.
Advances • The advances should be
to employees collectible within one
year or within the normal
-certain amount of money operating cycle of the
loaned to employees business.
payable in cash through
salary deduction
 Accrued
Income/revenue
-income is already earned but not yet
paid
-money that's been earned but has yet to be
received
-is revenue that has been earned by providing a
good or service, but for which no cash has been
received
 Merchandise
Inventories
-represents unsold goods at the
end of the accounting period
• Thisis applicable only to
refers to all the items, goods,
merchandise, and materials held by a merchandising business .
a business for selling in the market
to earn a profit.
 Supplies or
Supplies on Hand
-represents the cost of
stationery, paper, pencil,
ink , and other related • Thisaccounts refers to
supplies purchased and unused supplies.
used, but still on hand at
the end of accounting
period
Examples of Supplies Descriptions:

• Store supplies • Office Supplies • Shop Supplies • Manufacturing

supplies
 Prepaid
Expenses
-expenses that are paid in
advance but not yet
• The business has paid the
incurred or remain expense in advance but was not
unexpired at the end of the able to utilize it at
period the end of the period .
Examples of Prepaid Expenses

• Prepaid Rent • Prepaid Interest • Prepaid • Prepaid

Insurance Advertising
Allowance for
Bad Debts
-is an “asset offset” or
“contra-asset” account
• Thisis also called Allowance
which provides for possible for Doubtful Account and a
losses from uncollected deduction from accounts
accounts receivable. receivable.
Classification of
Assets
NONCURRENT ASSETS
 PPE
(Plant, Property and
Equipment)

-represents tangible assets which

are held by an enterprise for use
in production, or supply of goods • The term “property, plant and equipment”
and services, for rentals to others is not an account title to be used in
recording transactions, but a line item in
or for administrative purposes and financial statement presentation.
are expected to be used during
more than one period
 Assets to be
classified as PPE
(Plant, Property and
Equipment)
1. Assets must have physical existence
2. The assets are expected to be used for more than one reporting period of the
company
3. They must not be for sale
4. They must be used in business operations
5. Except for asset “Land” they must undergo depreciation
Examples of
PPE
 Land
-refers to a piece of lot or
real estate owned by the
enterprise on which a • The land should be used in the
building can be constructed day to day operation of the
for business purposes business.
 Building
-edifice or structure used to
accommodate the office,
• It is used for building structures of the
store, or factory of a business which usually include the
business enterprise in the administrative building, warehouse, the
conduct of its operations processing plant and the store outlet
 Machinery
-represents machines used
by the business in
• Usually manufacturing companies or service
production process entities have this account title in their
balance sheet.
 Equipment
-includes calculators,
typewriters, adding
• It is used for building structures of the
machine, computers steel business which usually include the
filing cabinets, electric fan, administrative building, warehouse, the
trucks and cars, and the processing plant and the store outlet.
like used by the business
Examples of Equipment specifications:

• Office • Store • Delivery

Equipment Equipment Equipment
Furniture and
Fixtures
-includes chairs, tables,
carpets, curtains, lamp and
• The specific account titles may be
lighting, counters, display used such as office furniture and
cases, fixtures and wall fixtures, and store furniture and
decors fixture.
 Accumulated
Depreciation
-an “asset offset” or “contra-
asset” account.
-simply refers to the sum of • Itis deducted from related
depreciation for several years property and equipment except
-represents the expense portion of land.
the asset because of wear and
tear.
 Long-term
Investments
-are assets held by the
business entity for the • Investments are also held by the business
purpose of accumulating entity for capital appreciation or other
wealth through capital benefits earned through trading activities.
• An investment that is not readily
distribution such as ,]marketable and intended to be held for
interest, royalties, more than one year is classified as long-
dividends, or rentals. term investment.
 Intangible
Assets
• These includes copyrights, patents, franchises,
trademarks, lease rights, licenses, brand names,
-refer to identifiable nonmonetary subscription lists, secret processes, and non-
assets without physical substance competition agreements.
that are controlled by the entity
as a result of past events and
from which future economic
benefits are expected to flow to the
entity.
 CLASSIFICATION OF ASSETS
Current Assets Noncurrent Assets
Cash Land
Classification Investment in Trading Securities Building
of Assets Notes Receivable Equipment
Interest Receivable Furniture and Fixtures
Accounts Receivable
The following table Advances to employees
summarizes some of Merchandise inventory
Accrued Income
the example of Supplies on hand
current and non- Prepaid insurance
Prepaid rent
current assets
 • Tables, chairs, curtains, lighting fixtures,
and wall decors
• Typewriter, air-conditioner, calculator,
computer and the like
Drill 1 • An account representing the amounts
owed by charge customers evidenced by
a note.
Identify the following asset
accounts • Edifice, structure used to house the
office, store or factory
• Lot used by the business on which a
building can be constructed
• Non-monetary assets without physical
substance held for use in the production
• An account representing the amounts
owed by charge customers,
 Cash

Office Equipment

Store Supplies

Accounts Receivable

Assets Prepaid Insurance

Building

Prepaid Interest
Identify the following assets into
current and non current. Notes Receivable

Accrued Income

Store Equipment

Furniture

Petty Cash

Land

Prepaid Rent

Delivery Equipment
 Cash -Current

Office Equipment -Non-current

Store Supplies -Current

Accounts Receivable -Current

Assets Prepaid Insurance

Building
-Current

-Non-current

Prepaid Interest -Current

Identify the following assets into
current and non current. Notes Receivable -Current

Accrued Income -Current

Store Equipment -Non-Current

Furniture -Non-current

Petty Cash -Current

Land -Non-current

Prepaid Rent -Current

Delivery Equipment -Non-current

 ___________ 1. Accounts Receivable
___________ 2. Supplies on Hand
___________ 3. Advances to employees
Assets ___________ 4. Investment in Trading
Securities
Identify the following assets into
current and non current. ___________ 5. Prepaid Rent
___________ 6. Cash
___________ 7. Office Equipment
___________ 8. Furniture and Fixture
___________ 9. Buildings
___________ 10. Land