Classification Of Assets

Classification of Sources of Financing

Divided into 2 types:

Divided into 3 types

Permanent Assets

Expected to be held for more than a year

Two types viz:-

· Fixed asset

• Permanent current assets which includes current assets like cash / stocks / receivables re: minimum cash or bank balance or minimum level of stocks (safety or buffer stocks) maintained by the firm over the year

Permanent Sources

Financing with maturing period more than one year which includes medium term loans, common stock and long term debts

Temporary Assets

Current asset that will be liquidated and replaced within the current year.

Therefore:

Current assets = Temporary + Permanent

Temporary Sources

Short term financing like short term notes payable, commercial paper and loans secured by accounts receivable and inventories. Natural sources is the accounts payable/creditors of the firm.

Spontaneous Sources

Comprises trade credit and other accounts payable that arise spontaneously in the firm’s daily operations. Other sources like accrued taxes, accrued expenses still not paid