Assets are classified, in their most general form, into current assets and non-current assets. However, to have a better understanding of the assets that an organization may have, they can be classified into current assets, fixed assets, permanent investments and other assets. This classification is due to the liquidity of the assets and the intention with which the company has acquired this right or.
1. Current assets
In current assets, the organization's most liquid accounts must be related; a current asset, in addition to being liquid, must have the intention of becoming cash in the short term (one year). In addition, current assets list the assets that represent rights that will also be extinguished in the short term. This group of assets is divided into several subgroups:
1.1. Available or effective
This subgroup represents the money available in cash and bank accounts. It is normal for companies to prefer to manage their resources in bank accounts, due to the security that comes from keeping money kept in banks. However, it is necessary and sometimes unavoidable to have cash, for the very operation of the business.
1.2. Temporary investments
Temporary investments can be translated as the representation of that money that is not being used in the daily or normal operations that the organization incurs "for temporary periods" in the short term; that is, equal to or less than a year, in order to take advantage of the excess liquidity and make them profitable, while requiring those resources to invest them in the operation of the business.
1.3. Debtors
The money owed to the company by the actors who are related to it in its operation is represented in this subgroup. After the cash and temporary investments, in order of liquidity, there is the money that the company expects to recover in the short term and that it has loaned or given to entities outside it.
1.4. Inventories
Inventories are made up, in the case of commercial companies, by the assets that the company has with the intention of selling. When the company produces the goods it markets, other types of inventories appear, such as raw materials, products in process, materials for manufacturing, or goods in transit.
1.5. Prepayments
They generally represent services that have been paid for but have not been enjoyed, such as insurance. They are considered current assets when they represent rights that are to be extinguished in the short term.
1.6. Goods for sale
They represent the assets that the company decides to put up for sale for different reasons, different from its particular line of business. For example, a machine that is decided to sell because a new technology is going to be implemented.
2. Fixed assets
They have two essential characteristics. They are assets and rights of the company with a permanent character and are related to the corporate purpose of the business. They are divided into:
2.1. Non-depreciable tangible plant fixed assets
They are the assets of an organization that can be touched or touched and that do not lose their value for their use. The classic example is the land.
2.2. Depreciable tangible plant fixed assets
Assets that can be touched or felt and that lose value due to their use (the majority), buildings, machinery and equipment, furniture and fixtures, vehicles, tools and computer equipment are examples of these assets.
2.3. Expendable tangible fixed assets
Natural resources that are held permanently in organizations and that are exploited within the corporate purpose. They are depleted to the extent that they are limited.
Non-depreciable intangible fixed assets
Assets that represent rights for the company and that do not lose their value over time like trademarks.
2.4. Depreciable intangible fixed assets
Assets that represent rights for the company but that lose their value over time, such as patents.
3. Permanent investments
They are characterized by being permanent but are not related to the corporate purpose of the business. An example of this group of assets are investment portfolios or the shares owned by companies that make up the same economic group.
4. Other assets
Those that are generally unproductive or that recover or become extinct in the long term. Examples are: long-term loans granted to employees or partners, assets that are not used in production and do not generate financial performance or savings made for a special purpose to be used in the distant future and therefore lose their liquidity status.
Source: Alexánder Guzmán Vásquez, David Guzmán Vásquez, Tatiana Romero Cifuentes. Financial Accounting. Universidad del Rosario, 2005, pp. 62-71
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Through the following video you can complement your learning about asset classification. (The explanation begins at 40 seconds and ends at 9 minutes and 53 seconds)
