Explain types of business assets.

Assets refer to the valuable resources owned by a business firm. Assets may be classified into the following categories:

1. Fixed Assets — These assets are purchased for use in business and to generate revenue, not for resale. They are of permanent nature and are used until their useful life. They are subject to depreciation. Examples: Land, buildings, plant and machinery, furniture, motor vehicles.

2. Current Assets — These assets are converted into cash within a short period. They are acquired for resale or conversion into cash. Current assets are of two types:

   • Liquid Assets — Cash in hand, cash at bank, bills receivable, short-term investments.
   • Floating Assets — Stock-in-trade, sundry debtors, etc.

3. Wasting Assets — The value of these assets diminishes with the passage of time. Examples: Mines (coal, gold), oil wells, leasehold rights, copyrights and patents.

4. Fictitious Assets — These are not really assets but represent expenses or losses of a heavy nature whose benefits are expected to extend over several years. They have no realisable value but are shown on the assets side until written off. Examples: Share issue expenses, preliminary expenses, heavy advertising expenses, research and development expenses.