Definition:
An asset is a resource that is owned or controlled by a company and is expected to provide future economic benefits. Assets can be tangible or intangible.
Types of assets:
- Current assets: Assets that are expected to be converted into cash or used up within one year. Examples include cash, accounts receivable, inventory, and prepaid expenses.
- Non-current assets: Assets that are not expected to be converted into cash or used up within one year. Examples include property, plant, and equipment, intangible assets, and investments.
Key points about assets:
- Ownership: Assets are owned or controlled by the company.
- Future benefits: Assets are expected to provide future economic benefits.
- Balance sheet: Assets are listed on the balance sheet of a company.
- Valuation: Assets are valued at their fair market value or historical cost.
Why are assets important?
- Financial health: A company’s assets are a key indicator of its financial health.
- Decision-making: Assets are used to make decisions about investments, financing, and operations.
- Profitability: Assets are used to generate revenue and profits.
In essence, assets are the resources that a company owns or controls, and they are essential for the company’s financial success.
