Comment by eviks
2 years ago
Of course it would be, asset is anything of value, you're confusing with subtypes of assets. Just mujhe liability is anything you owe regardless of for how long
2 years ago
Of course it would be, asset is anything of value, you're confusing with subtypes of assets. Just mujhe liability is anything you owe regardless of for how long
> Of course it would be, asset is anything of value, you're confusing with subtypes of assets. Just mujhe liability is anything you owe regardless of for how long
If an office buys snacks on Monday for the office party on Friday, they're not counting it as an asset and depreciating it on their books.
If food production or delivery were part of the core business, it would be one thing, but in the context that OP's talking about, it would be overkill at best (and fraudulent, in extreme cases) to try and count a transient consumable as an asset on their books.
Depreciation isn't relevant here, again, you're confused in the types of assets, not all of them are depreciated, only some with some specific properties like time of expected user. Just read the definition of assets in any (accounting) dictionary, or try to record your snack purchase in real accounts and see which side of the balance sheet this account end up in (hint: inventories, assets).
Do you actually do that? When people are working late at the office and you order pizzas you put that into your inventory and then remove it as people consume the pizzas? I record that into a separate operating expenses account meant for this kind of fringe benefit, not into inventory.
Pretty small so I do the accounting as well, but I think I'd lose my mind if I had to record them into inventory. Then when they leave half the pizzas for the next day, I record that? No way.
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The person you're replying to is confused, but that's because accounting can be confusing.
An account is fundamentally either an asset or a liability. When you buy something with a credit card, you've incurred a liability, and gained an asset, no matter what you've purchased. If you use a debit card or cash, you're trading one asset for another.
One of the basic asset categories is expenses. That's the confusing part! When you acquire an asset, which is consumed or otherwise has no book value, that's an expense.
So when you buy groceries with a debit card for a hundred bucks, that's a +100 in Expenses:Groceries, and a -100 in Assets:Checking. If you buy the same groceries with a credit card, it's +100 in Expenses:Groceries, and -100 in Liabilities:CreditCard. When you pay off the credit card, that's -100 Assets:Checking, and +100 in Liabilities:CreditCard.
Asset is overloaded here, because Expenses are not included in calculating net assets. It's confusing! I find it even more confusing that Income is a liability, which always gets lower. That's because whoever paid you had a liability to do so, which they met out of assets.
This is also why, when you pull a CSV of a checking account, purchases are positive numbers, and income is negative. A CSV of a credit card will have purchases as negative, and payments as positive. It's the difference between an asset account and a liability account. Again, not to be confused with net liabilities: Income is a liability, but not one you owe anyone, rather the contrary, Income just gets smaller and smaller (ideally! If it isn't getting smaller then your net assets will be shrinking, most of us can't afford that for long).
The main thing is that an account which fluctuates from zero to positive, or accumulates, is an asset account. One which fluctuates from zero to negative, or accumulates negatively, is a liability account. There are times when this matters, notably when you can take a tax deduction for expenses, that's a good example of why they're on the asset side of the books.
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> or try to record your snack purchase in real accounts and see which side of the balance sheet this account end up in (hint: inventories, assets).
Yeah, and as I said, this makes sense for a company for which food is a relevant part of their business, but in the context OP is asking about, nobody is tracking it this way.