An asset is anything of value owned by a person or company. Assets can be converted into cash depending on demand conditions. In accounting, the term “asset” in a balance sheet includes cash, inventories, property rights and goodwill. Assets can be used to generate cash flows.
Types of Assets: Tangible
The various types of assets are:
Tangible assets: These assets have a physical existence, such as equipment, building and real estate. It has two sub-classes:
Current assets: These are cash as well as assets that can be converted into cash, or consumed within a year or within an operating cycle.
Fixed assets: These assets, such as tools, machinery, land, buildings and furniture, are purchased with the sole aim of generating profits. Fixed assets, also called PPE (property, plant and equipment), are purchased for long term use.
Types of Assets: Intangible
Intangible assets are not present in the physical form, which makes it very difficult to evaluate them. Thus, these assets cannot be bought and sold at fair value. These assets include:
* Copyrights: Legal rights granted to the owner of an intellectual property, granting him/her exclusive rights. No one can use that intellectual property without obtaining permission from the copyright owner.
* Goodwill: This is the difference between the current and fair market price of the net asset value (NAV) of a company.
* Trademark: A distinguishing attribute by which a company is readily identified.
* Trade name: It is a name under which a business trades. This name could be different from the registered or legal name and can be considered as the company’s brand.Download