Assets and Claims

Statement of financial position shows the form in which the wealth of a business is healed and how much is held in each form. It sets out the assets of the busniess, on the other hand, it sets out the claims against the busniess.

Assets

An assets is essentially a resource held by a busniess. to qualify it must have the following characteristics.

• It must be an economic resource. This type of resource provides a right to potential economic benefits. These benefits must not be equally available to others. Examples include

- cash generated from producing goods or services

- cash received from the proceeds on selling the resources

- the value recieved when exchanged for another economic resource.

- the value recieved when used to satisfy debts incurred by the business and

- cash generated from renting or leasing it

• An economic resource only needs to have the potential to generate profit, they do not need be certain or even probable.

• The economic resource must be under control of the business.

• The economic resource must be capable of measurement in monetary terms. Sometimes an asset cannot be measured with a great deal of certainty. Therefor we use estimates, the estimate has to be a faithful representation of the asset.

•

Things that usually appear as assets on a financial statement.

Property

Plant and equipment

Fixtures and fittings

Patents and trademarks

Trade receivables

Investement outside the business

An asset does not have to be a tangible asset.

Claims

Claim is an obligation of the business to provide cash, or some other form of benefit to an outside party.

Equity - This represents the claim of the owner against the business. This claim is some times referred to as owners capital.

Liabilities - represent the claim of other parties apart from the owners.