Theory question 103
Double Entry and the Ledger3. Explain the following: (i) fictitious assets; (ii) intangible assets; (iii) real accounts; (iv) nominal accounts; (v) long-term liabilities.
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(i) Fictitious assets: debit balances with no physical existence or realisable value, carried forward until written off, e.g. preliminary expenses, discount on issue of shares, debit balance on profit and loss.
(ii) Intangible assets: assets with value but no physical form, e.g. goodwill, patents, trademarks, copyrights.
(iii) Real accounts: accounts of assets and property, e.g. land, buildings, machinery, stock, cash.
(iv) Nominal accounts: accounts of incomes, expenses, gains and losses, e.g. rent, wages, discount received; they are closed to the profit and loss account.
(v) Long-term liabilities: debts repayable after more than one year, e.g. debentures, long-term bank loans, mortgages.
Give a definition and an example for each.