Nature of Property
Legal ownership is not the only criterion for classifying things in accounting terms as an asset; for example, a person purchases an item at the time of hire purchase but does not become the buyer until the purchase price is fully paid The owner of the item. However, the project is still recorded as an asset along with corresponding obligations. Similarly, although the lessee has never been the owner of the lease item, he can record the project as an asset, but at the same time shows a corresponding obligation
In the accounting sense, ownership usually means "legal ownership
If a person is the owner of a value or is derived from a person who is the owner of the value or the right to use it, The source of the economic benefits of a particular source is the property of the person concerned, he is the economic owner, but he may not be the lawful owner. In this case, the accounting substance should take precedence over the legal form in determining the most appropriate accounting procedure
The main function of accounting is to determine the profit. However, revenue generation requires capital investment to provide the facilities needed for continuous and infinite business operations.
Historically, expenditures for unallocated costs over a period of time are deferred costs. From an accounting point of view, they represent an asset. If these costs can be recovered within a year, they are liquid assets, and they are fixed assets if they can be recovered over a longer period of time.
The classification of assets is crucial for determining the profit and showing the firm's position at a particular time, in other words, the composition of its assets and the nature of its obligations. The purpose of acquiring fixed assets is to use them to generate revenue. They are not acquired for the purpose of resale. Fixed assets must produce income-generating products or, in other words, they must be used for commercial operations.
The largest fixed asset classes in accounting terms are tangible, such as buildings, machinery and vehicles. Do not use depreciated or depleted land because it is never "consumed" and is considered a tangible fixed asset. In assessing buildings, machinery and vehicles, these assets need to be depreciated and must be allocated as costs each year.
Another group of assets are intangible fixed assets such as patents, copyrights, trademarks and goodwill.
Finally, the last item considered to be an asset is an external asset, also known as an investment. These investments include fixed-term investments in fixed income, investment in common stocks of other companies, pension funds, housing schemes and insurance policies, and finally investment real estate