Which of the following would be classified as a natural resource?

Which of the following would be classified as a natural resource?

Patent on an oil extraction process.

Land held as an investment.

Timber purchased by a lumber yard.

Diamond mine.

Goodwill.

Answer

General guidance

Concepts and reason
Natural Resources- The resources which are supplied by nature are natural resources. E.g. timber stands mineral deposits, land, water, coal, petroleum etc.

The resources which are generated without the intervention of humankind are natural resources. These are also called wasting assets as these are depleted with use.

Definition of assets: An asset is a resource which is owned by the company in exchange of something in value. The assets are purchased to add or produce value for company. E.g. land, cash, goodwill, intellectual rights, cars, vehicle.

Assets are of 2 types-

1.Tangible assets

2.Intangible assets

Intangible assets: The assets which cannot be touched but has a value. These assets have no physical existence but reported in the balance sheet. These are long term resources of companies.

For e.g. Goodwill, patents, copyrights, Trademarks.

Fundamentals

Natural Resources- Key characteristics of natural Resources-

• Supplied by nature

• Without human intervention

• Reported at cost and depletion is also treated in balance sheet

Step-by-step

Step 1 of 2

Patent on an oil extraction process- Patents means to have an exclusive right to use or transfer the assets for a particular period of time. Patents are granted by US patent and Trademark office. These are intangible assets to be reported in balance sheet.

Land held as an investment: - Land held for investment is for business purpose and done by management to achieve long term benefits. It cannot be considered as natural resource. Business can use land for the purpose of investment which means purchased at lower price and sold whenever there is a rise in the value.

Timber purchased by lumber yard: - Lumber yards are one where woods or wood related products are used for sale or construction. Timber purchased from lumber yards cannot be taken as natural resources as it has been brought up by mankind. As per the definition of natural resources, these are one which is extracted naturally without human interruption.

Goodwill: - This is something which creates value to company. When one company acquire other company then all assets, liability are purchased along with good relations with customer, market base, brand name. So, this is what we called goodwill. This is an intangible asset off course not the natural resource.

Step 2 of 2

Diamond Mine: - The best example of Natural resources is mines. There are heavy metals mines from where minerals/metals are extracted such as diamond mine. Diamond is extracted from mines. This is considered as natural resource.

Diamond mine is considered as natural resources.


Diamonds are natural resources as these are extracted from mines.

Answer

Diamond mine is considered as natural resources.

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