| Understanding accounting terminology is important | | | | business operations. |
| for the purpose of learning accounting theory and | | | | Items Included |
| practice. Basic accounting concepts serve as a | | | | Depending on the type and period of consumption |
| foundation for proper knowledge and ability to | | | | on the business operations, assets are divided into |
| apply it in practice. In this article concept of asset | | | | the following groups: |
| will be explored. | | | | - Current Assets - these are items which are |
| Concept | | | | consumed by the business within the period of |
| Considering the definition of Asset, it represents | | | | one year or less. examples can be Accounts |
| properties owned by the business. In order for | | | | Receivable, Inventory, Prepayments. These items |
| the asset to be recognized it must have a | | | | are not depreciated or amortized. |
| monetary value, which can be estimated reliably. | | | | - Long-term Assets - these are items which are |
| This category can include any items, material and | | | | consumed in the business operations for the |
| immaterial, used by the business in its operations | | | | period longer that one year. Therefore cost of |
| to earn income. | | | | these items is not included into the income |
| Coming back to the accounting equation, where | | | | statement at the moment of their acquisition, but |
| Assets=Liabilities+Equity, it is essential to | | | | rather is depreciated, i.e. included into the |
| understand that assets can be financed by two | | | | expenses gradually depending on the useful usage |
| types of sources, i.e.: | | | | period of the particular item. Examples can be |
| - Equity - own means of the business | | | | plant, property, equipment, vehicles. In the balance |
| shareholders. These means do not have a | | | | sheet net book value of these assets is indicated, |
| determined maturity date, i.e. there is no obligation | | | | which is the difference between their cost and |
| to repay them back on the certain date | | | | accumulated depreciation (share of the cost |
| - Liabilities - borrowed financial means, belonging to | | | | already included into the expenses) Balance Sheet |
| creditors. These items have a determined | | | | must present Assets in the proper way providing |
| maturity date, i.e. the business is obliges to pay | | | | separate information on the above groups. This is |
| them back on the certain date. Despite the | | | | required to judge whether business have enough |
| sources of the financing still the business owns | | | | current assets to cover its current liabilities and to |
| the assets and can operate for the purpose of | | | | analyze how the assets are financed. |