Classification of Assets & Classification of Sources Of Funds

May 30th, 2008 Comments off
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Tabulated below for easy reference are the classification of assets and the sources of finance

 

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

 

 

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Financial Accounting

 
 

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