« Back to Glossary Index

An asset is anything that has monetary value and can be owned by an individual or organization. Assets are typically classified into two main categories: tangible assets and intangible assets.

Tangible assets are physical assets that have a concrete form and can be seen, touched, and measured. Examples of tangible assets include cash, land, buildings, vehicles, machinery, and inventory. Tangible assets can be further divided into current assets, which can be easily converted into cash within one year, and non-current assets, which have a useful life of more than one year.

Intangible assets, on the other hand, are non-physical assets that lack a concrete form and cannot be seen, touched, or measured. Examples of intangible assets include patents, trademarks, copyrights, brand names, and intellectual property. Intangible assets also have a useful life of more than one year, but unlike tangible assets, they cannot be physically touched or sold.

Asset also have been categorised based on its liquidity, like current assets, which can be converted into cash quickly, and long-term assets, which are less liquid and may take longer to convert into cash.

In accounting and finance, the value of an asset is recorded on the balance sheet, which is a financial statement that provides a snapshot of a company’s financial health at a specific point in time. The balance sheet is divided into two main sections: assets and liabilities. Assets are listed on the left side of the balance sheet and represent the resources owned by a company. Liabilities, on the other hand, are listed on the right side of the balance sheet and represent the debts and obligations that a company owes to others. The difference between a company’s assets and liabilities is known as equity or net assets.

It’s worth noting that assets can also be held for speculation purposes, in other words, to reap short-term returns, or they can be held as investments, to earn returns in the long-term.

In summary, assets are resources that have monetary value and can be owned by an individual or organization, which can be tangible or intangible, current or non-current, liquid or illiquid. They are reported on the balance sheet and balance with the liabilities and equity to give a picture of a company’s overall financial health.

« Back to Financial Terms Index