What is asset?

Budget center - meaning
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An asset is defined as a resource controlled by the entity; as result of past events and from which future economic benefits are expected to flow to the entity.
Control is the ability to obtain the economic benefits from the asset, and to restrict the ability of others to obtain the same benefits from the same item.An entity usually uses assets to produce goods and services to meet the needs of its customers, and because customers are willing to pay for goods and services, this contributes to the cash flow of the entity. Cash itself is an assets because of its command over other resources.
Many assets have physical form, but this is not an essential requirement for the existence of asset.
Assets result from past transaction or other past events. An asset is not created by any transaction that is expected to occur in the future but has not yet happened. For example an intention to buy inventory does not create an asset.
An asset should be expected to provide future economic benefits to the entity. Providing future economic benefits can be defined as contributing, directly or indirectly, to the flow of cash (and cash equivalents) into the entity.
In the statement of financial position assets are usually categorized as current and non current assets.


Author: amidu edson

I am certified accountant with more than 5 years of teaching experience. Currently am teaching auditing and assurance, management accounting and financial accounting for student preparing for professional exams such as ACCA and CPA.