What Is Fictitious Assets Examples?

Are you curious to know what is fictitious assets examples? You have come to the right place as I am going to tell you everything about fictitious assets examples in a very simple explanation. Without further discussion let’s begin to know what is fictitious assets examples?

What Is Fictitious Assets Examples?

Fictitious assets are assets that do not have any physical existence or tangible value but are still recorded in the balance sheet of a company. These assets are usually created as a result of accounting practices or transactions, and they do not represent any real economic value. In this blog post, we will delve into the concept of fictitious assets, and their importance, and provide examples of such assets.

What Are Fictitious Assets?

Fictitious assets are assets that do not have any physical existence or tangible value but are still recorded in the balance sheet of a company. These assets are usually created due to accounting practices or transactions, and they do not represent any real economic value. Fictitious assets are typically created to balance the books, and they are not intended to be sold or used in any way.

Examples Of Fictitious Assets:

Preliminary Expenses: These are expenses that are incurred before a company begins its operations, such as legal fees, registration fees, and fees for setting up the company. These expenses are recorded as assets in the balance sheet and are gradually written off over a period of time.
Deferred Revenue Expenditure: These are expenses that are incurred for the long-term benefit of the company, such as research and development expenses or advertising expenses. These expenses are recorded as assets in the balance sheet and are gradually written off over a period of time.
Discount on Issuance of Shares: This is the amount by which the issue price of shares is less than their face value. The discount is recorded as an asset in the balance sheet and is gradually written off over a period of time.
Goodwill: Goodwill is the amount that a company pays for an acquisition over and above the fair value of the assets and liabilities of the acquired company. Goodwill is recorded as an asset in the balance sheet and is not subject to depreciation.
Deferred Tax Assets: These are tax assets that arise due to temporary differences between the book value and tax value of assets and liabilities. These assets are recorded as assets in the balance sheet and are gradually written off over a period of time.

Importance Of Fictitious Assets:

Fictitious assets are important as they help to balance the books of a company and provide a more accurate picture of its financial position. These assets are also useful in determining the value of a company in case of a merger or acquisition. Fictitious assets may not have any real economic value, but they are an important part of the accounting process and provide a better understanding of a company’s financial position.

Conclusion:

Fictitious assets are assets that do not have any physical existence or tangible value but are still recorded in the balance sheet of a company. They are created as a result of accounting practices or transactions and are important in balancing the books and providing a more accurate picture of a company’s financial position. Examples of fictitious assets include preliminary expenses, deferred revenue expenditure, discount on issuance of shares, goodwill, and deferred tax assets.

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FAQ

What Is An Example Of Fictitious?

Fictitious is related to the Medieval Latin word fictīcius, meaning “artificial,” “imaginary,” “feigned,” or “fraudulent.” It was first used in English as an antonym for natural. For instance, a fake diamond would be referred to as a fictitious one.

What Is Meant By Fictitious Assets?

The assets which are valueless but are shown in the financial statements or the expenses which are treated as assets are known as Fictitious Assets. For example, preliminary expenses which incur at the time of the establishment of the company.

Is Goodwill A Fictitious Asset?

It is intangible in nature because it cannot be touched or felt, but goodwill has a measurable value. As a result, goodwill isn’t regarded as a fictitious asset.

What Are The Example Of Intangible And Fictitious Assets?

Intangible Assets – Trademarks, Patents, Know-how, etc. Fictitious Assets – Goodwill, it is a compensation paid for the reputation established by a business.

What Is Fictitious Assets In Simple Words?

Fictitious assets are those assets which do not have a physical existence and any realisable value, but are represented as actual cash expenditure in the financial statements.

Which Is Categorized As Fictitious Asset?

Fictitious assets are the assets that have no tangible existence but are represented as actual cash expenditure. The main purpose is to create this account for expenses that are not placed in any account headings. Examples: Promotional marketing expenses.