What Is an Asset?

An asset is a resource with 澳洲幸运5官方开奖结果体彩网:economic value that an individua🔯l, company, or country owns or controls with t🥂he expectation that it will provide a future benefit.

How Assets Work

Individuals usually think of assets as items of value that can be converted into cash at some future point and that might also be income-producing or appreciating in value until that time. They can be financial assets like🦋 stocks, bonds, and mutual funds or physical assets like a home or an art collection.

An asset may be something that has the potential to generate cash flow in the case of businesses. It might reduce expenses or improve sales regardless of whether it's a 澳洲幸运5官方开奖结果体彩网:tangible asset like manufacturing equipment or a fleet of trucks or an 澳洲幸运5官方开奖结果体彩网:intangible asset like a patent or a trademark.

A company must possess a right to 𓃲the asset as of the date of its financial statements for it to be counted as one of its assets.🌠

Types of Assets

Assets are reported on a company's balance sheet and can be broadly categorized into current or short-term assets, 澳洲幸运5官方开奖结果体彩网:fixed assets, financial assets, or intangible assets.

Current assets

澳洲幸运5官方开奖结果体彩网:Current assets are short-term economic resources that are expected to be converted into cash or consumed within one year. Current assets can include cash and cash equivalents, 澳洲幸运5官方开奖结果体彩网:accounts receivable, physical inventory, and various prepaid expenses.

Cash is easy to value but accountants must periodically reassess the recoverability of inventory and accounts receivable. A receivable will be classified as impaired if there's evidence that it might be uncollectible. Companies might have to 澳洲幸运5官方开奖结果体彩网:write off those assets if inventory becomes obsolete.

Fixed assets

Fixed assets are resources with an expected life of more than a year, such as plants, equipment, and buildings. An accounting adjustment known as depreciation is made for fixed assets as they age. It allocates the cost of the asset over time. Depreciation may or may not reflect the fixed asset's loss of earning power.

澳洲幸运5官方开奖结果体彩网:Generally accepte﷽d accounting princ🌟iples (GAAP) allow depreciation under several methods. The straight-line method assumes that a fixed asset loses its value in 澳洲幸运5官方开奖结果体彩网:proportion to its useful life. The accelerated method assumes that the asset loses its value faster in its first years of use.

What's considered useful life varies according to the type of asset. The Internal Revenue Service (IRS) assigns office furniture and fixtures a useful life of seven years under the general depreciation system (GDS). Cars and trucks have a useful life of five years.

Financial Assets

澳洲幸运5官方开奖结果体彩网:Financial assets can include stocks, corporate and government bonds, and other types of securities. They tend to be liquid unlike fixed assets and they're valued acꦜcording to their current pric❀e on the relevant market.

Intangible Assets

Intangible assets are economic resources that have no physical presence. They include patents, trademarks, copyrights, and goodwill. Intangible assets can be 澳洲幸运5官方开奖结果体彩网:amortized over their useful life for accounting and tax purposes similar to the depreciation process for fixed assets.

Assets vs. Liabilities

An asset is something of economic value that's owned or controlled by a person, a company, or a government. A liability is the opposite. It's something that's owed to another person, company, or government. Examples of liabilities include loans, tax obligations, and 澳洲幸运5官方开奖结果体彩网:accounts payable.

Explain Like I'm 5

An asset is something of value that you own or that's owed to you. The loan would be an asset if you lent money to someone because they're obligated to repay you that amount. The loan would be a liability for the person who owes you the money.

The Bottom Line

Assets are anything of val✱ue that an individual, a business enterprise, or another entity owns. Different types of assets are treated differently for tax and accounting purposes. Assets are generally a good thing to have and liabilities less so.