In the previous article (“Importance of drawing up a financial plan”), I discussed why you need to draw up a list of assets and liabilities as part of your financial planning. Your balance sheet is the summary of your assets and liabilities, and the cornerstone of your financial plan.
In this article, let’s unpack what assets are – a mundane statement to some, but an eye-opener to others.
Accountants will tell you that an asset is “a present economic resource controlled by the entity as a result of past events, and that an economic resource is a right that has the potential to produce economic benefits”. This is according to the International Accounting Standards Board’s revised Conceptual Framework for Financial Reporting.