Thursday, October 11, 2007


In business assets are probable future economic benefits controlled by an entity as a result of past transactions or events and from which future economic benefits may be obtained. Assets have three essential characteristics:

1)They embody a future benefit that involves a capacity, singly or in combination with other assets, in the case of profit oriented enterprises, to contribute directly or indirectly to future net cash flows and in the case of not-for-profit organizations, to provide services;
2)The entity can control access to the benefit; and
3)The transaction or event giving rise to the entity's right to, or control of, the benefit has already occurred.

Contrary to what many people believe, owning a house is not an asset because of the lack of positive cash flow whenever someone decides to become a homeowner. In addition to this, homeowners have to pay repair costs on top of their mortgage payments out of their own pockets. On the other hand, if you owned the note on the house and someone was paying you monthly mortgage payments directly than that is what you would call a true asset.