Definitions for TrueValueMetrics
Assets

There are three main sections in a balance sheet ... the assets, the liabilities and the net of these. Assets may be classified in a number of ways.

For financial for profit balance sheet purposes the following are the main classifications:

• Current assets

• Fixed assets

• Intangible and other assets

Current assets ... Current assets are the assets that change rapidly and are liquid like cash, or will convert to cash quite quickly ... usually no more than in 12 months. The main classifications are:

• Cash

• Accounts receivable

• Inventory

• Prepayments

Fixed assets ... In for profit accountancy, fixed assets are the assets that change quite slowly ... usually over multiple years. The cost of is the amount the fixed assets lose value during the period ... this is depreciation. The main classifications are:

• Land;

• Buildings;

• Leasehold improvements;

• Equipment;

• Vehicles;

• Vessels;

• Furniture, Fixtures and Fittings (FFF).

Intangible and other assets ... It has been recognized correctly over the past few decades that there were important values that should be incorporated into the balance sheet as assets ... referred to as intangible assets. The main groups are:

• Goodwill; and

• Patents and trademarks.

There are also assets that are based not on the money costs to acquire them, but the value that they have in making the activities productive. These include:

• Human resources; and

• Know how.

Depreciation ... Depreciation is a construct that makes it possible to present reports about business and economic performance in a logical way that reflects the depletion in value of an asset over a period of time while it is economically useful. Depreciation is an Economic Concept

The idea that depreciation should follow tax rules is confusing. Depreciation is an economic and accounting construct to charge the depletion in asset value based on an economically sound reality.