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Assets
To define assets and contingent liabilities it is important to distinguish them. 1. Asset is any item of a specified value owned by companies, governments and individuals. Assets have the characteristics of appreciation in value with time when exchanged for money. Assets are owned, controlled and exchanged to produce money that cannot be defined as an asset.
There exist various types of assets, tangible and intangible assets. Tangible assets are further classified into current and fixed assets. Current assets are those that are based on normal and daily operations, they include, cash balances and employees. Fixed assets are physically seen and used for long term investment, they include land and erected buildings.
Intangible assets on the other hand are those that add value to the owner’s investment in more ways that are advantageous to the owner other than control and exchange for money but cannot be physically touched or counted on. These assets include, brand names, patented material, copyrighted material, stocks, goodwill’s and software’s.
Contingent Liabilities
Contingent liabilities is a disadvantageous financial responsibility that can occur to an entitled firm, government, company and any other organization that has responsibilities. These liabilities are brought about by the outcomes of unknown events and situations in the future. An institution’s recorded statement of account does not feature these liabilities, they are rather described in a balance sheet as probable and reasonable estimates of any financial breakthrough.
Contingent liabilities have been tied to the possibility of financial loss to any institution and thus reasonable doubt to the amount of loss that will occur cannot be calculated. Furthermore no one can predict accurately whether they will occur or not. Contingent liabilities include, non-acknowledged debt claims, liquidated assets and damages, destruction of property and assets by natural catastrophe’s like floods and tornado’s, disputed financial accounts as taxes and guarantees and warrantied bearing products.
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