Assets Meaning / Definition
Assets Meaning – Â Assets are any resources which consists of some economic value owned by a firm, person or country. Owners expect some value in future from them. Assets appears on the Balance Sheet. In simple words, any item that brings cash flows for the organization are termed as Assets.
Assets Definition –Â Â “The economic resources of a company. Â They includes cash, accounts receivable, inventories, land, buildings, vehicles, machinery, equipment and other investments”.
Assets Meaning clearly tells about the accounting treatment of it. Now let’s have a look over types of assets.
Fixed Assets –Â These are the long term resources of a firm. For example – plants and facilities, building, livestock, machinery,land,etc. They are recorded in Balance Sheet after providing for depreciation. For calculating depreciation, companies either go for straight line method or written down value method. With the usage of the asset, asset value declines. However, this concept doesn’t applies in case of land. As land prices never falls, they appreciates.
Current Assets Â are short – term assets. These are convertible into cash withing 1 year. The example of these assets are cash, cash equivalents, marketable securities, inventory or stock, debtors, bills receivables, accounts receivables, etc.
Intangible Assets are the assets that one cannot see or touch. In accounting terms, such type of assets do not have any physical existence. Examples – patents, copyrights, goodwill, trademarks, etc. These assets are either write off or amortized.
Financial Assets refers to securities and investments. Â Examples – Equity shares, Preference shares, bonds, etc.
Importance of Assets to Business
Whether tangible or assets intangible in nature, both adds value to the business. In case of need of finance, they helps in securing it.
So, it becomes very important for not only try to increase their assets but also maintain them. Protecting a tangible asset results in smoothing the business process without any hindrance. Protection of Intangible assets leads to keeping your business ideas, formulas and plans to yourself.
Now a new concept is also emerging in business world with respect to humans as assets. There is Licensing intellectual property concept. With the use of these licensing policy, organizations now even can keep their knowledge, skills and business methods with themselves.
Example of Assets
Suppose Ram has a stationary shop. What are the assets here?
Fixed Assets – Shop, land
Current Assets – books, pens, notebooks and other stationary items.