Answer to Question #87776 in Accounting for Nhlaphu

Question

Indicate why differentiation is made between financial assets and non financial assets?

Answer 1

A non-financial asset has a physical value (for example, real estate, equipment, machinery or vehicle). In contrast, financial asset has a value, wich is based on a contractual claim (for instance, stocks, bonds and bank deposits). This two types of assets differ in how they are bought and sold. While financial assets can be bought and sold on exchanges on any business day at the price easy to obtain; a non-financial assets require search of a potential buyer and negotiations about a sale price. Therefore, financial assets are more attractive to a lender.