How POSSESSION and CONTROL of an asset are different in financial acconuting?

Possession of an asset might mean just having a physical control of the asset. The party who holds the asset is the possessor of such asset.

But the word control holds special meaning in the business world. Especially in financial accounting. And understanding the meaning of control and ability to differentiate between the possession and control is vital because it has its implications in preparing financial statements.

In relation to assets, the word control means the entity that has the ability to control the benefits from such asset. And we can understand that possession of an asset does not also mean having a control on benefits. Similarly, to have a control on benefits of an asset does not necessarily require possession of the same asset.

So, it means the person who does not even have the possession of the asset can still have its control and opposite.

1 COMMENT

  1. It sounds like you’re doing problems yourself by looking for to solve this issue rather than looking at why their is often a issue in the First place. thanks !!! quite really helpful post!

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