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1.14 Assets

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VCE Accounting Unit 3. Video of this presentation can be found on my YouTube channel here https://www.youtube.com/channel/UCf5jyuJoYwie8tWfvjEc0zg.

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1.14 Assets

  1. 1. 1.14 ASSETS
  2. 2. Video of this presentation at… YouTube Channel for VCE Accounting
  3. 3. © Michael Allison. Author’s permission required for external use. 1.14 ASSETS Assets Liabilities Owner’s Equity Revenues Elements of Accounting Expenses
  4. 4. © Michael Allison. Author’s permission required for external use. Assets Definition: An asset is: 1. A resource controlled by the entity 2. As a result of past events (transactions) 3. From which future economic benefits are expected to flow to the entity 1.14 ASSETS
  5. 5. © Michael Allison. Author’s permission required for external use. Assets  Resources controlled by the entity:  The resource must be under the control of the firm, i.e. the firm decides how and when it is used and not someone else  E.g. Jack owns a small business – his brother has lent him the use of his delivery van to use in the business, valued at $50,000  Is this an Asset of the business? 1.14 ASSETS $50,000  No – the business does NOT have an Asset  The business (or Jack) does not control the resource – the van belongs to his brother  The brother can make decisions about the van – not the business, e.g.  Sell the van  Put new tyres of the van
  6. 6. © Michael Allison. Author’s permission required for external use. Assets  Arises from past events – the asset comes about because of a transaction the business engaged in in the past. 1.14 ASSETS Business Other Party
  7. 7. © Michael Allison. Author’s permission required for external use. Assets  Will provide future economic benefits  The resource must be capable of generating some sort of economic gain for the firm in the future.  There must be some sort of benefit that is yet to be received. Business Future economic benefit 1.14 ASSETS
  8. 8. © Michael Allison. Author’s permission required for external use. Assets  The future economic benefit provided by an asset can be cash…  Example: a firm has a debtor owing $1,000 Business Future economic benefit When the debtor pays the business, the economic benefit flowing into the business will be money… 1.14 ASSETS
  9. 9. © Michael Allison. Author’s permission required for external use. Assets  The future economic benefit provided by an asset is not always cash…  Example: a firm has a delivery vehicle valued at $30,000 Business Future economic benefit The economic benefit provided by the vehicle will be the ability to make deliveries to customers in the future 1.14 ASSETS
  10. 10. © Michael Allison. Author’s permission required for external use. Assets  The future economic benefit provided by an asset is not always cash…  Example: a firm prepaid $1,200 of insurance for 2015… Business Future economic benefit The economic benefit provided during the rest of 2015 is insurance protection in the event of an emergency Insurance protection 1.14 ASSETS
  11. 11. © Michael Allison. Author’s permission required for external use. 9.9 251.5 454.0 61.8 25.9 174.8 14.3 30.3 - 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 500.0 Cash Stock Land and buildings Plant and equipment Computer equipment Fixtures and fittings Computer software Goodwill David Jones – Assets ($m) 1.14 ASSETS
  12. 12. © Michael Allison. Author’s permission required for external use. TASK In-class Homework Cambridge Exercise 1.6 - Assets X

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