Asset
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An asset is anything of value owned by a person or company. Assets can be converted into cash depending on demand conditions. In accounting, the term “asset” in a balance sheet includes cash, inventories, property rights and goodwill. Assets can be used to generate cash flows.
Table of Contents
Types of Assets: Tangible
The various types of assets are:
Tangible assets: These assets have a physical existence, such as equipment, building and real estate. It has two sub-classes:
An asset is anything of value owned by a person or company. Assets can be converted into cash depending on demand conditions. In accounting, the term “asset” in a balance sheet includes cash, inventories, property rights and goodwill. Assets can be used to generate cash flows.
Types of Assets: Tangible
The various types of assets are:
Tangible assets: These assets have a physical existence, such as equipment, building and real estate. It has two sub-classes:
Current assets: These are cash as well as assets that can be converted into cash, or consumed within a year or within an operating cycle.
These assets include:
- Cash and its equivalents: Including currency, deposit accounts, money orders, checks and bank drafts.
- Inventory: Stock of goods held by an organization.
- Accounts receivable: The amount owed to an asset holder in exchange for goods and services provided.
- Short term investments: Securities bought to be sold in the near future. These investments are aimed at generating income on short-term price movements.
- Prepaid expenses: Operating costs paid for services or products to be used in the future.
- Long-term investments: These assets are often bought to be held for long term and can include land, special funds, bonds, long-term notes and stocks.
Fixed assets: These assets, such as tools, machinery, land, buildings and furniture, are purchased with the sole aim of generating profits. Fixed assets, also called PPE (property, plant and equipment), are purchased for long term use.
Types of Assets: Intangible
Intangible assets are not present in the physical form, which makes it very difficult to evaluate them. Thus, these assets cannot be bought and sold at fair value. These assets include:
- Patents: Exclusive rights granted to a person for an invention or a discovery for a specific timeframe.
- Copyrights: Legal rights granted to the owner of an intellectual property, granting him/her exclusive rights. No one can use that intellectual property without obtaining permission from the copyright owner.
- Goodwill: This is the difference between the current and fair market price of the net asset value (NAV) of a company.
- Trademark: A distinguishing attribute by which a company is readily identified.
- Trade name: It is a name under which a business trades. This name could be different from the registered or legal name and canbe considered as the company’s brand.
