Question

In personal balance sheet, there are three types of assets, namely, financial assets, personal use assets and luxury assets. Discuss the characteristics of these assets with examples.     

Answer 1

Financial Assets - These are assets that are in the nature of being convertible into cash and cash equivalents with relative ease. As in financial assets are either Direct cash and cash equivalents or the nature itself being the receivable in cash and cash equivalents.

Assets which do not serve any other purpose other than being capable of conversion into cash.

Examples -

Bank funds, Debtors receivables, cash advances made to persons,Listed securities etc.

Personal use assets - As the name suggests these are assets which are for the utility of personal nature for the owner.

Eg. Personal car, motorcycle, furniture at home, house etc.

Luxury assets - These are items which are for luxury or ornamental or designer purposes and are predominantly not owned for capital appreciation or for income, but are mainly personal indulgences and societal value. However in some cases, they may appreciate in value, but the purpose is not for the capital appreciation.

Eg. Jewelry, ornaments, luxury cars, gold bars held for ornamental purpose, designer clothing / watches etc.