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Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)

Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.  Future economic benefits refer to the capacity of an asset to benefit the enterprise by being exchanged for something else of value to the enterprise, by being used to produce something of value to the enterprise, or by being used to settle its liabilities.  The future economic benefits of assets usually result in net cash inflows to the enterprise.

To be an asset, a resource other than cash must have three essential characteristics: 

1.   The resource must, singly or in combination with other resources, contribute directly or indirectly to future net cash inflows.

2.   The enterprise must be able to obtain the benefit and to control the access of others to it.

3.   The transaction or other event giving rise to the enterprise's right to or control of the benefit must already have occurred. 

Assets currently reported in the financial statements are measured by different attributes, including historical or acquisition cost, current (replacement) cost, current market value, net realizable value (selling price of the item less direct costs necessary to convert the asset), and present value of future cash flows, depending on the nature of the item and the relevance and reliability of the attribute measured.

Assets are recognized in the financial statements when the item meets the definition of an asset, when it can be measured with sufficient reliability, when the information about it is capable of making a difference in user decisions, and when the information about the item is reliable (verifiable, neutral, or unbiased, and representionally faithful).  Assets need not be recognized in a set of financial statements if the item is not large enough to be material and the aggregate of individual immaterial items is not large enough to be material to those financial statements.

Assets are usually classified on a balance sheet in order of their liquidity (or nearness to cash) as follows: 

1.   Current assets.

2.   Long-term investments.

3.   Property, plant, and equipment.

4.   Intangible assets.

5.   Other assets (including deferred charges and organizational costs). 

Current assets are cash and other assets that are reasonably expected to be converted into cash, sold, or consumed within the normal operating cycle of the business or one year, whichever is longer.  An operating cycle is the average time required to expend cash for inventory, process and sell the inventory, collect the receivables, and covert them back into cash.

Accounts appearing on the balance sheets of banks include: 

Cash and due from banks:  Currency and coins held by tellers reserve cash in the vault.  Due-from-bank items represent deposits with correspondent banks.

Federal funds sold:  Claims to deposits held by the Federal Reserve for member banks that enable them to meet reserve requirements.  The purchase and sale of federal funds is sometimes used for short-term adjustments to market and regulatory conditions.

Investments in U.S. Treasury securities:  U.S. government marketable obligations, including Treasury bills, notes or bonds.

Investments in obligations of states and political subdivisions:  Debt securities referred to as municipal bonds and tax-exempt bonds.

Real estate loans:  Loans resulting from real-estate purchases and development transactions.  The real estate serves as collateral for the loan.

Commercial loans:  Loans made for business purposes.

Instalment loans:  Consumer loans.

Office buildings, equipment, and leasehold improvements:  Historical cost of bank property used for banking purposes less accumulated depreciation.

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