Asset non asset difference

Hello everybody,

today I want to write few words about difference between something important in the company, that can be asset and close to asset but not be considered as asset from acocuntancy standpoint.

First of all let's start from definition. Asset has three key parts in its definition:

  1. ownership
  2. generates benefit
  3. arises from transaction

Full definition of asset sounds like this: Asset is a resource owned or controlled by the firm that it is expected to generate future economic benefits and arises from a past event or transaction. 

From this definition stnadpoint piece of equipment which is worth 1M $ is an asset because 

  1. owned by company
  2. will generate profit
  3. resulted from transaction

The diet Coke brand developed by Coca Cola company is not an asset because it

  1. owned by company
  2. will generate profit
  3. NOT result of past transaction

It has 2 out of three key pieces. That's why it is not an asset recognized at balance sheet.

What about lottery tickets?

  1. Owned by company
  2. most probably will not generate benefit
  3. result of past transaction

Next goes, employee is it an asset? No, because from 3 criterias you don't own employee. But in medieval ages, you could consider employees as asset.

No Comments

Add a Comment