Question

Wasting assets refer to:

• A. Assets with indefinite life
• B. Natural resources that get depleted over time
• C. Assets which are expensed immediately
• D. Financial instruments

Answer 1

Answer:

B. Natural resources that get depleted over time

Assets

• Assets are items of value used by the business in its operations.

• E.g.- Land, building, Furniture, Goods, cash.

Assets can be following types

a) Fixed Assets (Non-current Assets)

• Assets which are held for continued use in the business for the purpose of producing goods or services and are not meant for sale. Eg Land and Machinery.

Non-current assets are classified into two

• 1. Tangible Assets

• 2. Intangible Assets

• Tangible Assets - Have Definite shape and physical existence. They can be seen and touched - L & B ,P&M, Furniture etc.

• Intangible assets - Do not have physical existence, cannot seen and touched. Eg- Patents, Goodwill, Trademarks, Brand name, computer software, Prepaid expenses.

b) Current assets

• Current assets are those assets which are meant for sale or which can be converted into cash within a year . For Eg. Goods are purchased within a purpose to resell and earn profits, Debtors can be converted into cash within a short period.

• Eg.- Debtors, Stock, Bill receivable, Cash in hand and cash at bank.

Fictitious Assets

• Are neither tangible nor intangible assets .

• Fictitious Assets are certain account balances of certain expenses/losses.

• They have no real value but are shown on the assets side of the balance sheet only for technical reason.

• E.g.- Heavy Advertisement Expenditure, discount on issue of debentures, preliminary expenses.

Wasting Assets

• A wasting Assets is a one of the natural resources, when output is extracted from wasting asset, its value is coming down (exhausted) year after year. Some of the examples are mines, quaries, oil fields, Natural gas deposits etc.

• As the assets is extracted ,it depreciates, eventually having little or no residual value.