Assets: (Things in your possession that give rise to future benefits) Assets are the opposite of liabilities. Liabilities are passed actions that require future settlement whereas assets are things that will bring future economic benefit. Assets are things that can be converted into cash that have some defined method of determining their value. Appraisals, appreciation rates etc. Assets and liabilities make up the 2 major categories of a balance sheet.
Assets = Liabilities + Owner Equity (Equity is the value of your ownership)
Assets have three primary characteristics:
1. They have the ability to provide you with cash at sometime in the future.
2. Any events that are required to give you the rights to the asset have already occurred.
3. Access to the asset is in your control
In accounting, the term asset does not represent ownership. The term Equity represents ownership. Assets include cash, accounts receivable, notes receivable, houses, factories, inventories etc. Tangible things that you have control of that can be turned to cash at sometime in the future.
Valuation, Appreciation and Depreciation
1. Valuation: The process of determining the market value of an asset under a given set of circumstances.
a. For Purposes of accounting, assets are recorded at cost. (This is called book value) Cost is a defining valuation because someone was willing to exchange cash for the asset from the original owner.
b. The fair market value of the asset as you own it is determined in several ways.
i. An appraisal. An appraisal takes into account the similar sales of similar items in similar conditions (called comps) and evaluates a reasonable price that an existing market is willing to pay.
ii. A contract to purchase. A bona fide contract to purchase something with a security can be a valuation.
iii. Fast versus slow sales. A fast sale will not yield as much as a slow sale.
2. Appreciation: A term used in accounting to describe the increased value of an asset.
a. Appreciable assets are those that don’t wear out or have become scarce or cannot be used up.
3. Depreciation: A term used in accounting to describe the decrease in value over time of certain assets. Cars, equipment, factories etc.
a. Depreciation is a non-cash expense for a business that represents the
Salvation and the three characteristics of an asset: Salvation is the rescue from the wrath of God that Jesus Christ made possible for us on the cross. We could not make the future payment that the liability of our sin required. Since we could not make the payment our past action required, we would have had to spend forever in a place of torments, a debtors prison, known as Hell. Jesus took our liabilities and gave us the greatest life asset there ever was.
The three characteristics of an asset:
1. Provides a future value. We have been given the promise of a future that never ends and cannot depreciate.
a. We have been promised a future home in heaven.
i. Heaven is a place like no other place that has ever existed. Revelation 21:18-21.
ii. Heaven is a place of no health issues or wars, no death or sorrow. Revelation 21:4
iii. Jesus will return and take us there Himself. I Thessalonians 4:16-18. A mansion has been prepared there for us and Jesus will be with us there. John 14:1-3
iv. We have not even been told of all the incredible things that will be there. I Corinthians 2:9
v. We will be like Jesus when we go there. I John 3:1-2
vi. All things that we face each day in this life loose their magnitude when we consider the future home in heaven that we have with Jesus.
2. The event that gives us the right to it has already occurred. Jesus Christ has already come to this earth, lived and died in our place and for our sins.
a. “It is finished” Jesus said these words in John 19:3 just before He died on the cross.
b. His death and resurrection are what secured salvation for all those that will accept Him and His finished work on the cross. II Corinthians 5:14-15.
c. The Bible repeats over and over that Jesus came, died on a cross and rose again for us. I Corinthians 15:3-4
3. Access to it is in our control. We have been given a free will in which to chose salvation and to not have it forced upon us. Some people do not have access to it and therefore it is not an asset to them. Those of us that have access have obligation also. That obligation is to make sure that all the world hears about Jesus Christ.
a. We must call upon Him: Romans 10:13-14.
b. Without access, it cannot be an asset. God’s will is that all have an opportunity to chose. II Peter 3:9
c. We have access by faith. Romans 5:2 Ephesians 2:18
