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Assets Definition and Characteristics

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Questions and Answers

What is the primary characteristic that defines an asset?

It is a present right to an economic benefit (correct)

It is contractual

It is separable

It is tangible

What is the essential criterion for an item to be considered an asset?

It must be capable of generating net cash inflows

It must be exchangeable

It must have a present right to an economic benefit (correct)

It must be tangible

What is the ultimate goal of an asset in a business entity?

To provide services or benefits to the entity's employees

To increase the entity's creditworthiness

To enhance the entity's reputation

To generate potential net cash inflows to the entity (correct)

What is the primary purpose of an asset in a not-for-profit entity?

To provide desired or needed goods or services to beneficiaries Signup and view all the answers

What is NOT an essential characteristic of an asset?

It is separable Signup and view all the answers

Which of the following is a characteristic of an asset?

A right that can be exchanged for something else of value to the entity Signup and view all the answers

What is the primary reason why a public road outside an entity's property is not considered an asset?

Because it is available to everyone Signup and view all the answers

What is necessary for a right to qualify as an asset?

It must provide an economic benefit to the entity Signup and view all the answers

What is the main difference between a right that is an asset and a right that is not?

One provides an economic benefit and the other does not Signup and view all the answers

What is the significance of incurring a cost to acquire an item?

It has no bearing on whether the item is an asset or not Signup and view all the answers