CLASSES OF ASSETS
48. Asset accounts are accounts representing resources or assets of the business. Assets are classified as Fixed; Active or Floating; Passive or Speculative; Fictitious.
Fixed assets are those permanent forms of property which are a necessary part of the equipment used for conducting the business—such as real estate, buildings, machinery, etc.
Active or floating assets are those forms of property of which the quantity in our possession varies from day to day—as merchandise, accounts, cash, etc.
Passive or speculative assets are those (a) whose values are not readily determined, or (b) whose values are subject to market fluctuations—as, for example, (a) franchises, copyrights, patents; (b) stocks, bonds, or other speculative securities.
Fictitious assets are those which are not represented by tangible property, or which are of value to a going business but would have no market value if the business were closed out or liquidated. These assets are frequently represented by an expense account on the books. The initial advertising expense necessary to launch the business successfully is frequently carried on the books as an asset. The amount of such advertising expense is spread over a stated period, a certain proportion being charged into the regular expense accounts each year until the entire amount is used.
49. Examples of Fixed Assets. The assets of an ordinary mercantile business are of the first two classes only—fixed and floating. The most common forms of fixed assets of such a business are: