Assets are resources that control by the entity and those resources are expected to have the economic inflow into the entity in the future.
Those assets included cash, account receivables, cares, computer equipment, land, building, and any other resources that control by the entity.
The balance sheet is one of five financial statements that report the entity’s financial position in the context of assets, liabilities, and equity as at a reporting date. Assets are not present in the income statement.
The following are the criteria that use to recognized assets in the balance sheet of the entity.
Basically, assets including cash, account receivables, cars, computers equipment, land, building, and any other resources. These assets classed into two main classifications in the balance sheet. Current Assets, and Non-Current Assets.
Based on the definition provided above, the entity could recognize assets in its balance sheet only if those resources meet these conditions:
- Assets are the resources that control by the entity
- Assets are expected to provide economic inflow into the entity in the future.
- Assets could measure reliably (this apply to all elements in financial statements)
That means that even though assets are controlled by the entity, but they are not expected to have future economic inflow, then the entity could not be recognized
The following are the summary of criteria that allow assets to be recognized in the balance sheet as per conceptual frameworks:
- An asset is recognized in the balance sheet when it is probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably.
- An asset is not recognized in the balance sheet when the expenditure has been incurred for which it is considered improbable that economic benefits will flow to the entity beyond the current accounting period. Instead, such a transaction results in the recognition of an expense in the income statement. This treatment does not imply either that the intention of management in incurring expenditure was other than to generate future economic benefits for the entity or that management was misguided. The only implication is that the degree of certainty that economic benefits will flow to the entity beyond the current accounting period is insufficient to warrant the recognition of an asset.