What is a Financial Asset? Flashcards
What is a financial asset?
An instrument that evidences claim on the properties of an entity (a person, a firm, or a company).
Examples of financial assets
Bonds, debentures, preference shares, ordinary shares
Where are financial assets shown on a balance sheet?
Under the heading of investments on the assets side
How are financial assets classified on a balance sheet?
Long-term investments or current assets, depending on the intended holding period
Term: Financial Asset
Definition: An instrument that evidences a claim on the properties of an entity (a person, a firm, or a company).
Term: Bond
Definition: A type of financial asset that represents a debt security issued by an entity.
Term: Debenture
Definition: A financial asset similar to a bond, representing a debt obligation of an entity.
Term: Preference Share
Definition: A financial asset that signifies ownership in a company with preferential rights to dividends and assets.
Term: Ordinary Share
Definition: A financial asset representing common ownership in a company with no preferential rights.
Term: Financial Instruments
Definition: Another term for financial assets, often used interchangeably.
Term: Securities
Definition: Another term for financial assets, often used interchangeably.
Term: Long-Term Investments
Definition: Financial assets intended to be held for an extended period, often shares in an associate or subsidiary company.
Term: Current Assets
Definition: Financial assets intended to be held for the short term, typically shown as current assets on the balance sheet.
What is a financial asset?
A financial asset is an instrument that evidences claim on the properties of an entity (a person, a firm, or a company). Examples include a bond, a debenture, a preference share, an ordinary share. They are also known as financial instruments and securities.
