In the context of finance and accounting, assets are resources that a company or individual owns or controls with the expectation that they will provide future economic benefits. Assets can be tangible, like cash, investments, real estate, and inventory, or intangible, like patents, trademarks, and copyrights.
There are several types of assets, including:
- Current assets: These are assets that are expected to be converted into cash within one year or one operating cycle (whichever is longer). Examples of current assets include cash and cash equivalents, accounts receivable, and inventory.
- Fixed assets: These are long-term assets that are used in a company’s operations and are not expected to be sold in the short term. Examples of fixed assets include buildings, machinery, and equipment.
- Intangible assets: These are non-physical assets that have value due to intellectual property rights or other legal entitlements. Examples of intangible assets include trademarks, patents, and copyrights.
- Financial assets: These are assets that represent a claim on the future cash flows or performance of another entity. Examples of financial assets include stocks, bonds, and mutual funds.
In general, assets are recorded on a company’s balance sheet and are classified as either current assets, long-term assets, or non-current assets (a combination of fixed assets and intangible assets). The value of an asset is typically recorded at its historical cost, although in some cases, it may be recorded at its fair market value.