Asked by taylor christy on Jul 21, 2024
Verified
A friend of the family has just received her first set of financial statements from her accountant.When she finds out that you are an accounting major, she asks you the following question: "Why aren't my employees listed as an asset on my company's balance sheet?"
Required:
Write an explanation describing the characteristics that an economic resource must possess in order to be considered an asset.Include in your discussion the primary reason why "human resources" are not recognized as assets.
Economic Resource
Assets or inputs that have the potential to contribute to the production of goods and services, providing economic benefit to businesses or individuals.
Asset
Resources owned or controlled by a business, projected to bring future economic benefits.
- Understand the layout and material that characterizes the classification and identification of assets, liabilities, and equity on the balance sheet.
Verified Answer
DC
derrius carterJul 21, 2024
Final Answer :
To be considered an asset, an economic resource must be able to contribute directly or indirectly to a company's net cash inflows; the company must be able to obtain the item's future benefits and control others' access to it; and the transaction or event giving rise to the company's right to, or control over, the benefits must have occurred.While "human resources" may meet these criteria, they are excluded from assets primarily because of the difficulty of reliably measuring their benefits.
Learning Objectives
- Understand the layout and material that characterizes the classification and identification of assets, liabilities, and equity on the balance sheet.
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