Account 6 Marks Question

Assets can be classified into (i) Non-current Assets, (ii) Current Assets, and (iii) Fictitious Assets:

1. Non-current Assets: Non-current Assets are those assets which are held by an entity or enterprise not with the purpose to resell but are held either as investment or to facilitate business operations. In other words, those assets are held by the business from a long-term point of view. Examples of non-current assets are Fixed assets, non-current Investments, Long-term Loans and Advances and Other Non-current Assets.

Fixed Assets: Fixed assets are those non-current assets of an enterprise which are held not to resell but with the purpose to increase its earning capacity. Fixed assets are further classified into:

1. Tangible Assets: Tangible Assets are those assets which have physical existence, i.e., they can be seen and touched. Examples of tangible assets are land, building, machinery, computer, furniture, etc.
2. Intangible Assets: Intangible Assets are those assets which do not have physical existence, i.e., they cannot be seen and touched. Examples of intangible assets are patents, goodwill, trademarks, Computer Software, etc.

2. Current Assets: Current Assets are those assets which are held by an entity or enterprise with the purpose of converting them into cash within a short period, i.e., one year. For example, goods are purchased with a purpose to resell and earn profit, debtors exist to convert them into cash, i.e., receive the amount from them, bills receivable exist again for receiving cash against it, etc.
3. Fictitious Assets: Fictitious Assets are those assets which are neither tangible assets nor intangible assets. They are losses not written off in the year in which they are incurred but in more than one accounting period.