Definition of Asset:
Anything that is useful and provide benefit is known asset.
When we say anything it means, we are talking about persons, software, tools, derivatives, ideas or
anything. If something you find is helpful in your daily life, to reduce the burden of particular
activity can be mentioned as an asset. Say, Meditation is an asset to reduce the daily stress.
An asset that can be touched and have physical properties is known Tangible asset. Example:
Machine, land, currency, derivatives etc
An asset that cannot be touched but has it’s importance is known as Intangible asset. Example:
Software, copyrights etc.
Current Assets Vs Fixed Assets:
Above mentioned assets appear on Balance sheet of a firm and are categorized into current assets and long term assets.
Current assets like stock inventory of a firm are used within same financial year.
Long term assets like machineries have an important factor of depreciation, how much machinery does the firm consume over year, which help them provide tax deduction as the total taxable income is reduced by the amount of depreciation shown by a firm.
Long term assets are used by firm for more than one financial year.
Bank Asset: Based upon above understanding of assets, we can now define bank assets as, assets that are useful to bank and help a bank make benefit or profit.
On a balance sheet, Bank asset are mentioned in beginning or left hand side. The assets can be divided into four category:
|Name||Physical Assets||Loans (Most Important)||Reserves||Government Securities|
|Type||Building, Furniture, Computers etc||Fixed interest Vs Floating Interest Loans||A)Reserve with Bank itself for daily transactions(Vault cash)
B) Reserve with Central Bank
|Earn||Help in Day-to-Day work||Interest||Secure Business||Safer investment to park extra money|
Assets under stress: When an asset cease to provide benefit to owner, or the loans given by banks which stop providing the interest or principal payments are known as assets under stress. These type of assets have negative impact on bank reputation and push their business cycle in loss.