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Asset

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This article is about the business definition. For other uses, see Asset(disambiguation .

In financial accounting , an asset is an economic resource. Anything tangible or intangible that iscapable of being owned or controlled to produce value and that is held to have positive economicvalue is considered an asset. Simply stated, assets represent value of ownership that can beconverted into cash (although cash itself is also considered an asset). [1

Simply put, !an asset is something that puts money in your poc"et!. [#

$he balance sheet of a firm records the monetary[%

value of the assets owned by the firm. It ismoney and other valuables belonging to an individual or business. [1 $wo ma&or asset classes aretangible assets and intangible assets. $angible assets contain various subclasses, includingcurrent assets and fi'ed assets. [ urrent assets include inventory, while fi'ed assets include suchitems as buildings and e*uipment .[+

Intangible assets are nonphysical resources and rights that have a value to the firm because theygive the firm some "ind of advantage in the mar"et place. 'amples of intangible assets aregoodwill , copyrights , trademar"s , patents and computer programs ,[+ and financial assets,including such items as accounts receivable , bonds and stoc"s .

Contents ! Formal definition " Asset characteristics

o ".! Assets in accounting

o "." #urrent assets

o ".$ %ong&term investments

o ".' Fi ed assets

o ".) *ntangible assets

o ".+ Tangible assets

o ". #omparison : current assets , li-uid assets and absolute li-uidassets

$ ee also

' /eferences

http://en.wikipedia.org/wiki/Asset#mw-navigationhttp://en.wikipedia.org/wiki/Asset#p-searchhttp://en.wikipedia.org/wiki/Asset_(disambiguation)http://en.wikipedia.org/wiki/Asset_(disambiguation)http://en.wikipedia.org/wiki/Financial_accountancyhttp://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Ownershiphttp://en.wikipedia.org/wiki/Ownershiphttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Asset#cite_note-Sullivan_2003_272-1http://en.wikipedia.org/wiki/Asset#cite_note-2http://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Asset#cite_note-CPA-3http://en.wikipedia.org/wiki/Asset#cite_note-Sullivan_2003_272-1http://en.wikipedia.org/wiki/Asset#cite_note-FinanceDict-4http://en.wikipedia.org/wiki/Buildingshttp://en.wikipedia.org/wiki/Capital_equipmenthttp://en.wikipedia.org/wiki/Asset#cite_note-CPA_Finance-5http://en.wikipedia.org/wiki/Goodwill_(accounting)http://en.wikipedia.org/wiki/Copyrightshttp://en.wikipedia.org/wiki/Copyrightshttp://en.wikipedia.org/wiki/Trademarkshttp://en.wikipedia.org/wiki/Patentshttp://en.wikipedia.org/wiki/Patentshttp://en.wikipedia.org/wiki/Computer_programhttp://en.wikipedia.org/wiki/Asset#cite_note-CPA_Finance-5http://en.wikipedia.org/wiki/Asset#cite_note-CPA_Finance-5http://en.wikipedia.org/wiki/Accounts_receivablehttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Asset#Formal_definitionhttp://en.wikipedia.org/wiki/Asset#Asset_characteristicshttp://en.wikipedia.org/wiki/Asset#Assets_in_accountinghttp://en.wikipedia.org/wiki/Asset#Current_assetshttp://en.wikipedia.org/wiki/Asset#Long-term_investmentshttp://en.wikipedia.org/wiki/Asset#Fixed_assetshttp://en.wikipedia.org/wiki/Asset#Intangible_assetshttp://en.wikipedia.org/wiki/Asset#Tangible_assetshttp://en.wikipedia.org/wiki/Asset#Comparison_:_current_assets_.2C_liquid_assets_and_absolute_liquid_assetshttp://en.wikipedia.org/wiki/Asset#Comparison_:_current_assets_.2C_liquid_assets_and_absolute_liquid_assetshttp://en.wikipedia.org/wiki/Asset#See_alsohttp://en.wikipedia.org/wiki/Asset#Referenceshttp://en.wikipedia.org/wiki/Asset#mw-navigationhttp://en.wikipedia.org/wiki/Asset#p-searchhttp://en.wikipedia.org/wiki/Asset_(disambiguation)http://en.wikipedia.org/wiki/Asset_(disambiguation)http://en.wikipedia.org/wiki/Financial_accountancyhttp://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Economic_valuehttp://en.wikipedia.org/wiki/Ownershiphttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Asset#cite_note-Sullivan_2003_272-1http://en.wikipedia.org/wiki/Asset#cite_note-2http://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Asset#cite_note-CPA-3http://en.wikipedia.org/wiki/Asset#cite_note-Sullivan_2003_272-1http://en.wikipedia.org/wiki/Asset#cite_note-FinanceDict-4http://en.wikipedia.org/wiki/Buildingshttp://en.wikipedia.org/wiki/Capital_equipmenthttp://en.wikipedia.org/wiki/Asset#cite_note-CPA_Finance-5http://en.wikipedia.org/wiki/Goodwill_(accounting)http://en.wikipedia.org/wiki/Copyrightshttp://en.wikipedia.org/wiki/Trademarkshttp://en.wikipedia.org/wiki/Patentshttp://en.wikipedia.org/wiki/Computer_programhttp://en.wikipedia.org/wiki/Asset#cite_note-CPA_Finance-5http://en.wikipedia.org/wiki/Accounts_receivablehttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Asset#Formal_definitionhttp://en.wikipedia.org/wiki/Asset#Asset_characteristicshttp://en.wikipedia.org/wiki/Asset#Assets_in_accountinghttp://en.wikipedia.org/wiki/Asset#Current_assetshttp://en.wikipedia.org/wiki/Asset#Long-term_investmentshttp://en.wikipedia.org/wiki/Asset#Fixed_assetshttp://en.wikipedia.org/wiki/Asset#Intangible_assetshttp://en.wikipedia.org/wiki/Asset#Tangible_assetshttp://en.wikipedia.org/wiki/Asset#Comparison_:_current_assets_.2C_liquid_assets_and_absolute_liquid_assetshttp://en.wikipedia.org/wiki/Asset#Comparison_:_current_assets_.2C_liquid_assets_and_absolute_liquid_assetshttp://en.wikipedia.org/wiki/Asset#See_alsohttp://en.wikipedia.org/wiki/Asset#References

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Formal definition

An asset is a resource controlled by the entity as a result of past events and from which futureeconomic benefits are e'pected to flow to the entity [- ( ramewor" /ar 0a).

Asset characteristics

/robably the most accepted accounting definition of asset is the one used by the InternationalAccounting Standards oard .[2 $he following is a *uotation from the I 3S ramewor"4 !Anasset is a resource controlled by the enterprise as a result of past events and from which futureeconomic benefits are e'pected to flow to the enterprise.! [5

$his means that4

The probable present benefit involves a capacity, singly or in combination0ith other assets, in the case of profit oriented enterprises, to contribute

directly or indirectly to future net cash flo0s , and, in the case of not&for&profitorgani1ations , to provide services2

The entity can control access to the benefit2

The transaction or event giving rise to the entity3s right to, or control of, thebenefit has already occurred.

mployees are not considered to be assets, li"e machinery is, even though they are capable ofgenerating future economic benefits. $his is because an entity does not have sufficient controlover its employees to satisfy the ramewor"6s definition of an asset.

Similarly, in economics an asset is any form in which wealth can be held.

Assets in accounting

In the financial accounting sense of the term, it is not necessary to be able to legally enforce theasset6s benefit for *ualifying a resource as being an asset, provided the entity can control its use

by other means.

$he accounting e*uation is the mathematical structure of the balance sheet . It relates assets,liabilities, and owner6s e*uity 4

Assets 4 %iabilities 5 #apital (0here #apital for a corporation e-uals 60ner3s7-uity

%iabilities 4 Assets & #apital

#apital 4 Assets & %iabilities

$hat is, the total value of a firms Assets are always e*ual to the combined value of its !e*uity!and ! liabilities .!

http://en.wikipedia.org/wiki/Asset#cite_note-IFRS_for_SMEs-6http://en.wikipedia.org/wiki/International_Accounting_Standards_Boardhttp://en.wikipedia.org/wiki/International_Accounting_Standards_Boardhttp://en.wikipedia.org/wiki/Asset#cite_note-7http://en.wikipedia.org/wiki/Asset#cite_note-8http://en.wikipedia.org/wiki/Cash_flowshttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Wealthhttp://en.wikipedia.org/wiki/Wealthhttp://en.wikipedia.org/wiki/Financial_accountinghttp://en.wikipedia.org/wiki/Financial_accountinghttp://en.wikipedia.org/wiki/Accounting_equationhttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Liability_(accounting)http://en.wikipedia.org/wiki/Asset#cite_note-IFRS_for_SMEs-6http://en.wikipedia.org/wiki/International_Accounting_Standards_Boardhttp://en.wikipedia.org/wiki/International_Accounting_Standards_Boardhttp://en.wikipedia.org/wiki/Asset#cite_note-7http://en.wikipedia.org/wiki/Asset#cite_note-8http://en.wikipedia.org/wiki/Cash_flowshttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Wealthhttp://en.wikipedia.org/wiki/Financial_accountinghttp://en.wikipedia.org/wiki/Accounting_equationhttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Liability_(accounting)

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Assets are listed on the balance sheet . In a company6s balance sheet certain divisions are re*uired by generally accepted accounting principles (7AA/), which vary from country to country. [0 Assets can be divided into e.g. current assets and fi'ed assets, often with further subdivisionssuch as cash, receivables and inventory.

Assets are formally controlled and managed within larger organi8ations via the use of assettrac"ing tools. $hese monitor the purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non9physical assets.

Current assets8ain article: #urrent asset

urrent assets are cash and other assets e'pected to be converted to cash or consumed either in ayear or in the operating cycle (whichever is longer), without disturbing the normal operations ofa business. $hese assets are continually turned over in the course of a business during normal

business activity. $here are + ma&or items included into current assets4

!. Cash and cash equivalents 9 it is the most li-uid asset , 0hich includescurrency , deposit accounts , and negotiable instruments (e.g., money orders,che-ue, bank drafts .

". Short-term investments 9 include securities bought and held for sale inthe near future to generate income on short&term price differences (tradingsecurities .

$. Receivables 9 usually reported as net of allo0ance for noncollectableaccounts.

'. Inventory 9 trading these assets is a normal business of a company. Theinventory value reported on the balance sheet is usually the historical cost orfair market value, 0hichever is lo0er. This is kno0n as the lo0er of cost ormarket rule.

). Prepaid expenses 9 these are e penses paid in cash and recorded asassets before they are used or consumed (common e amples are insuranceor office supplies . ee also ad;usting entries .

:ar"etable securities Securities that can be converted into cash *uic"ly at a reasonable price

$he phrase net current assets (also called working capital ) is often used and refers to the total ofcurrent assets less the total of current liabilities .

Long-term investments

;ften referred to simply as !investments!.

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". *nvestments in fi ed assets not used in operations (e.g., land held for sale .

$. *nvestments in special funds (e.g. sinking funds or pension funds .

=ifferent forms of insurance may also be treated as long term investments.

Fixed assets8ain article: Fi ed asset

Also referred to as // (property, plant, and e*uipment), these are purchased for continued andlong9term use in earning profit in a business. $his group includes as an asset land , buildings ,machinery , furniture , tools , I$ e*uipment, e.g., laptops, and certain wasting resources e.g.,timberland and minerals . $hey are written off against profits over their anticipated life bycharging depreciation e'penses (with e'ception of land assets). Accumulated depreciation isshown in the face of the balance sheet or in the notes. Asset is important factor in balance sheet

$hese are also called capital assets in management accounting .

Intangible assets8ain article: *ntangible asset

Intangible assets lac" of physical substance and usually are very hard to evaluate. $hey include patents , copyrights , franchises , goodwill , trademar"s , trade names , etc. $hese assets are(according to >S 7AA/) amorti8ed to e'pense over + to ? years with the e'ception ofgoodwill.

@ebsites are treated differently in different countries and may fall under either tangible or

intangible assets.

angible assets

$angible assets are those that have a physical substance, such as currencies , buildings , realestate , vehicles , inventories , e*uipment , and precious metals

Comparison ! current assets " liquid assets and absolute liquidassets

Current assets Liquid assets Absolute liquidassets

tocks

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#ash at bank #ash at bank #ash at bank

Accrued incomes Accrued incomes Accrued incomes

%oans and advances(short term

%oans and advances(short term

%oans and advances(short term

Trade investments(short term

Trade investments(short term

Trade investments(short term