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Asset & Types of Assets - Explained in Hindi | #23 Master Investor - YouTube
Channel: Asset Yogi
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Namaskar, my name is Mukul and welcome to Asset Yogi.
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Where we do not lock but unlock the knowledge of finance.
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If you read any financial statement of a business, especially a balance sheet
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of if you read business newspaper or business magazines
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then you got to see many types of assets
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For example current assets and non current assets
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fixed assets, tangible or intangible assets
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operating or non-operating assets.
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So many times there's confusion that which asset falls into which category.
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And what does it mean exactly?
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In this video, first, we will see asset's definition that what exactly is an asset?
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In how many ways do we categorise it?
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We will also see examples in each category
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That which types of assets fall into that category?
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So, do watch this video from start to end.
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Let's go straight to the blackboard.
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Let's try to understand what exactly is an asset.
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First I am going to talk about the technical definition.
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So, an Asset is such a resource that can be owned by any company or individual.
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That gives cash flows over the long term.
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Here, two important properties of assets are coming out
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that it is a resource which gives benefit in long term
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The second is its ownership. That any company or individual can own it.
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The third thing about assets is that they give economic value
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and can be exchanged and sold.
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So if I give you a practical example
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Let's suppose it is a factory and this land and this building combined is an asset .
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So what is the asset here?
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The factory itself is an asset that will give a long term benefit to any business.
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What are the portions in the factory?
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See one portion is the land, one portion is the building
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The third portion of it is plant and equipment.
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These all are assets, basically, these are fixed assets.
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Now, there are different types of assets as well.
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We will talk about every type of asset.
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See, if we want to classify the assets
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then we can classify it into three categories.
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One, its convertibility
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How fast it can give you cash?
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So, in this, there are two assets. One is the current asset.
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And second is non-current assets.
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Current assets are those which can be converted into cash in the short term.
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And non-current are the ones that can be cashed in the long term.
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Now, another type of classification is based on physical existence.
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One is the tangible assets.
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Which you can touch and feel.
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Second is your intangible assets which you cant' see, feel and touch.
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I'll tell you in detail about all of them and will examples too
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The third classification is according to the usage.
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That it is an operating asset or non-operating asset.
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Operating assets are those
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which are used in companies day to day operations and productions.
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And non-operating assets are those which are not related to daily operations
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but still, they give you value in the long term.
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Let me show you the example of all of them.
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So see, we discussed that broadly assets are of three types.
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One is current and non-current.
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These are mainly used in accounting conventions.
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Now, tangible, intangible, operation, non-operating,
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I will tell inside them which ones are what.
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As we talked of current,
What are current assets?
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which can be converted into cash in less than 1 year.
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By less than 1 year, it means
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Let's assume that in accounting convention
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anything that can be converted into cash in less than a year
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that we call short term.
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And which one takes more than one year to convert into cash
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Or we get its value in the long term
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that is your non-current assets or we can also call them long term assets.
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Let's see examples that which assets come under current or short term assets.
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One is your cash and deposits.
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So, this is the cash in hand with the company
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plus the fixed deposits with the bank
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or the cash in the bank
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which can be immediately converted into cash
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definitely, you can convert in in less than one year
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then that is your current assets.
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Then there are account receivables.
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Let's assume you sold something on credit
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you don't get the money immediately but you will get it.
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obviously, you will also get in less than 1 year
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so your account receivables are also current assets.
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Then there could be short-term investments.
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Investments that are for less than one year
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Wherever you are getting interests, returns in short-term
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that are your current assets.
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Then it can be your short-term loans and advances.
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Suppose the company has given a loan or has given some advances
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which will be recovered within 1 year
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that is also a current asset.
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Then it can be your pre-paid expenses
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suppose there's an insurance premium that you've paid in advance
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But you are getting its benefit within 1 year.
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It can be the contractor's payment, suppose you've paid them in advance.
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Then those are also your short-term assets.
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Then there's inventory
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Inventory means all the stock, all the goods companies have
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that all comes under current assets.
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Because that also can be converted into cash
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Because as soon as you sell the goods, you'll get the money
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or even if you do not get the money,
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it will go into the account receivables, which is also a kind of current asset.
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Now, in inventory, there are three types of inventories.
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One is of raw materials.
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Which is basically the goods before the manufacturing.
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Then one is a work in progress.
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which basically is the inventory of all the stocks during the manufacturing process.
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Then third is your finished goods.
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means the item is complete but it is still lying in your warehouse, not sold yet.
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That also comes under current assets.
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Those are all examples of the current assets.
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Let's talk about non-current now.
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In non-current assets, the First is the fixed assets.
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I've already discussed the fixed assets.
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So, one is your land and building.
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Wherever is your factory, warehouse, office
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these all are fixed assets.
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Then one is plant and equipment
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all of your plants, machineries, euipments
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Let's say you have computer equipments
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or you've printers
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or you've any machine
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or vehicles, construction equipments
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anything that is of use in your business and production
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all those are fixed assets.
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Also, in your office there are furniture and fixtures, those are also fixed assets.
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Then comes long term investment.
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Long term investments are those which will give you returns in more than a year.
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What can be in it?
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It can be stocks. Maybe your company has invested in stocks.
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It can be bonds, fixed deposits.
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We are talking about one than one year in all of this.
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It can be mutual funds.
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It can be vacant land.
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See here, land and building is a different thing,
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here it is a factory, which you are using immediately
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But in long term investment, vacant land in which is not operational right now.
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It is an investment only.
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So this comes under non-current assets.
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Then some are your intangible assets.
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Intangible assets are those which you can't touch or feel.
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So basically, patents, trademarks, copyrights
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Many companies deal in this thing
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For example, it is very important for pharma companies
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Or many times in tech companies, patents and copyrights are very important.
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These are also important in media companies.
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So these are your intangible assets.
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One is your goodwill and brand.
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You can't see goodwill or brand or can predict its fixed value.
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It can go up and down.
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So, this is also your intangible asset.
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Then there are the domains you've purchased from the internet,
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or you are operating some websites
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that comes in your intangible assets.
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There can be some proprietary items in your company.
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Can be some blueprints or maps.
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It can be software. There are databanks of the customers. Email-list or mobile-lists.
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It can be medical records. It can be some educational content of your company.
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These all come in intangible assets.
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And there are some assets that are not classified in any of the categories.
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So the company puts them into other assets.
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If I give you an example.
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So some can be your non-current receivables.
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Now, what are your non-current receivables?
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Like these account receivables were to be collected within a year
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And you would've got money.
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by chance, it may happen that you do not get the money immediately.
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And this may take more than one year.
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Then you can call such receivables as other receibvables.
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Then it will also come under non-current assets.
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Then one is your fictitious assets.
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Fictitious assets are basically fake assets.
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Basically, they are some expense or let's say the company has occurred some loss
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which is amortised by the company over a period of time.
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Let's suppose an advertising expense worth 10 lakhs.
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Companys says we do not want to show it all in once in the balance sheet
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So the company says, we want to show it within a period of 10 years.
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See, this value of 10 lakhs of an advertising expense
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it can be of use for 10 years.
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That's why the company may want to show it every year like 1-1 lakh.
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Just like these, there are some losses
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which the company wants to showcase over a period of time.
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So basically, it is not an asset but it is a type of virtual asset
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which the company is using to amortise the expense over a period of time.
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I'll make a detailed video on this
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so you'll understand fictitious assets in a bit more detail.
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So, this is all about current assets and non-current assets.
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I've made very detailed videos on current assets, fixed assets,
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tangible and intangible assets.
You can watch my videos.
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Let me quickly summarise it for you.
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All the current assets come under tangible assets.
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See, we can argue that we can't touch and feel these account receivables
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It can be merely some receipts or invoices in paper form.
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Or these investments can also in be paper form only.
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Long term investments would also be in mere paper form.
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It could be that these patents, trademarks, copyrights are also in mere paper form.
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But it is an accounting convention
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that all these patents, trademarks, copywriters and all these things
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are considered intangible assets.
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And all these, current assets, fixed assets come in tangible assets.
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long term assets are also counted in tangible assets
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I've already given you examples of intangible assets.
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Then this fictitious asset doesn't come in any of them.
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And these non-current receivables, basically, come into tangible assets.
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So this is all about tangible and intangible.
I think it would have been clear here.
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Now, second is your operating and non-operating assets.
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As I have told you about operating and non-operating
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operating assets are those which are used in the company's day-to-day operations.
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For example, cash and deposits.
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It can be of both kinds.
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Some cash and deposits could be used in daily operations.
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And maybe some FD is in the bank that you are not using in day-to-day operations
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or there's some money in the bank that you are not using in day to day operations.
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So this can be both operating and non-operating.
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Account receivables are not being used in day-to-day operations
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so they are non-operating.
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Short term investments, loans and advances are non-operating.
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Because you are not using them in day to day operations.
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Now, this pre-paid expense can also be operating and non-operating.
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If you are paying the insurance, then it is not being used daily.
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So, that becomes non-operating.
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But you have to pay the contractor's payment on day-to-day operations.
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So this can be operating.
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Now, this inventory basically comes into operating expense.
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because you have to do this work in day-to-day operations.
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Fixed assets, you'll use them every day, so this comes under operating assets.
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The long term investment is a non-operating asset
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because this is giving you non-operating income.
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It is not giving you operating income.
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Return from stocks, bonds, fixed deposits, mutual funds or vacant lands
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are a kind of non-operating income. It is a different income.
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It has no relation with operating assets.
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After that, you'll need all these intangible assets in day-to-day operations.
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If you do not have these patents and trademarks
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then how you won't be able to do your main work.
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You'll need all these other intangible assets in day to day operations
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so these are all operating assets.
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After that, non-current receivables,
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obviously, as we have already seen that account receivables are non operating
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so these are also your non-operating assets.
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After that, fictitious assets, so this doesn't come under any category
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so I'll Fictitious asset with you in a separate video.
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So, I think I have discussed all the classifications of assets.
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we've seen current, non-current assets
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we've seen tangible and intangible assets
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Along with that we've seen operating and non-operating assets.
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I've tried to cover all the major points in this video.
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Still, If any point was missing
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or you want to add something, you can comment down below.
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And don't forget to like and share this video.
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I try to share detailed videos on finance with you guys.
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I keep coming up with such informative videos everyday.
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So, if you haven't subscribed to the channel yet, then do subscribe to it
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and press the bell icon on your phone
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so that you can get the latest video's notification.
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See you in the next video
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till then keep learning, keep earning and be happy.
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