Asset

 An asset is a resource of an economic value. Assets are tangible or intangible items that an entity or a corporation owns, benefits from and controlled to produce value. Assets generate income for the business. The assets are either purchased or acquired by a company and it has monetary value in terms of cost, book value, market value or the residual value. Assets are represented as ownership of value that can be converted into cash. Assets are recorded on the right side of the balance sheet. Some of the examples of assets are cash, securities, accounts receivable, inventory, office equipment, real estate etc.

Assets are something that generates cash flow, regardless of whether the company’s manufacturing equipment or an individual’s rental apartment. The accounting equation relating to assets, liabilities and owner’s equity is

Assets = Liabilities +Stockholder's Equity (Owner's Equity)

Assets are classified as tangible and intangible assets. The tangible assets are classified into fixed and current assets and the intangible assets are classified as fictitious assets and intangible assets. The current assets are continually turned in a business during a normal business activity like stock, inventory and cash; fixed assets are purchased for long-term use in earning a profit in a business like land and buildings, property, equipment, furniture etc; intangible assets are not physical in nature but still can prove very useful in the long run of the business like goodwill, patents, trademarks, copyrights etc; and fictitious assets like deferred revenue expenditure etc. Intangible assets are described as nonphysical resources and rights that have a value to the firm as they provide some advantage in the market place.

The assets are managed and controlled within large organizations using the asset tracking tools. These tools monitor the purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non-physical assets.

Questions

• What is an asset?
• How are assets classified? Explain with examples.