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What Is an Asset? Definition and Examples

Accountant reviewing assets and liabilities

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Assets are resources that either an individual or a company uses. For example, someone’s personal assets may include their work experience or a life insurance policy. On the other hand, a business’s assets are things the company can use to generate revenue

In this guide, we’ll go over: 

Asset Definition

An asset is generally any useful thing or something that holds value. Most people have personal assets, like cash, savings accounts, bonds, life insurance policies, jewelry and collectibles. A person’s skills and abilities can also be an asset. 

In business, though, assets need to provide positive economic value — the resource must create or produce something that the company can sell for cash, or the resource itself must hold resale value. 

Most things a company owns or controls are assets in one way or another. For example, employees are assets because companies need people to keep things running, create products, or offer services. The building the employees work in is also an asset, as well as any piece of machinery and the inventory employees make or use. 

Who Needs to Know About Assets?

Assets are at the heart of any business’ finances, so business owners and members of a company’s finance team need to understand their company’s assets intimately. Accountants, in particular, must have a strong understanding of assets and how they affect a company’s finances. Accounting often involves looking at the relationships between assets and other key metrics of a business’s finances, like revenue, liabilities, and equity.

>>MORE: Learn more about what accountants do

Types of Assets

Business-related assets typically fall into three categories: how well the asset can be converted to cash, whether or not the asset physically exists, and how the asset is used. 

Conversion to Cash

How easily a company can convert something to cash is called liquidity. Some resources are very liquid, meaning they can be turned into cash easily. Others are less liquid, though. 

Current Assets

Current assets are very liquid — these are short-term resources that a company can quickly turn into cash. Typically, a company will hold current assets for a year or less before using or selling them. 

Some examples of current assets include: 

  • Cash or money in accessible accounts, like a savings account
  • Bonds
  • Inventory 
  • Accounts receivable (customers or clients who pay the company money)
  • Securities (like stocks

Non-Current Assets

Non-current assets, often called fixed assets, are not very liquid — these are long-term holdings owned by the company for many years before they become cash. 

Examples of non-current assets include: 

  • Buildings and other real estate
  • Machinery or production equipment
  • Retirement savings

Physical Existence

While many assets are material and can be held and seen, others aren’t — they are more like ideas or concepts than physical buildings or property. 

Tangible Assets

Tangible assets are exactly that — tangible. These types of resources often overlap with current and non-current assets, too. 

Examples of tangible assets include:

  • Buildings 
  • Machinery
  • Cash
  • Inventory
  • Equipment

Intangible Assets

Intangible assets may have a physical representation through a contract or form, but the asset itself cannot be held or touched in any absolute sense. 

Some examples of intangible assets are:

  • Copyrights
  • Brand recognition
  • Trademarks
  • Patents
  • Intellectual property

How the Asset Is Used 

How a business uses an asset is an important classification, especially when looking at future projections. A company must understand which resources are core to day-to-day operations and which are peripheral or non-essential for daily use. 

Operating Assets

A company’s operating assets are resources that are vital for daily function. There is a lot of overlap between operating assets and nearly every other category of assets. For example, many current assets, like inventory, are necessary for day-to-day operations. 

Examples of operating assets include:

  • Cash
  • Machinery
  • Copyrights
  • Buildings
  • Patents
  • Employees

Non-Operating Assets

Non-operating assets are non-essential resources that are not used daily by a company. Some non-operating resources are common for most businesses, such as stocks or unused real estate. However, certain companies may have different non-operating assets. For example, a company may own a patent for a product they no longer produce, making the patent a non-operating asset. 

Examples of common non-operating assets are: 

  • Securities (like stocks) 
  • Unused or broken machinery 
  • Vacant land or real estate
  • Excess or unallocated cash

Assets vs. Liabilities 

If assets are resources the company uses to generate income, liabilities are the opposite: These are financial obligations to others. Liabilities often include loan payments, mortgages, accrued expenses, and accounts payable (money owed to customers or clients). Every company is made up of a mix of assets, liabilities, and equity (investments into the company by founders or outside investors). 

Assets, liabilities, and equity are the building blocks of a company’s finance. They also are the core aspects of the accounting equation — a formula that ensures accuracy in a double accounting system. 

>>MORE: Learn more about the accounting equation

Showing You Understand Assets on a Resume

Assets are a part of the foundation for accounting, so many accounting skills rely on an in-depth understanding of assets. Suppose you have prior work or internship experience in accounting. In that case, some skills you can mention in the description of your experience or in your skills section that will convey an understanding of assets include: 

  • Compliance with generally accepted accounting principles (GAAP)
  • Creation of financial statements
  • Maintenance of the company’s general ledger 
  • Ensured accuracy in accounts payable and receivable

If you don’t have work or internship experience in accounting, you can focus on coursework you had that involved core accounting skills, such as understanding assets, liabilities, and equity. You can also use your cover letter to describe any experiences you have outside of the professional or academic space. For example, you can talk about if you’ve helped a friend or family member balance their small business’s books or organize their company’s finances. 

>>MORE: Check out the top accounting skills you need for your resume.

Accountants need a mix of hard and soft skills to be truly successful. Understanding assets and how they affect a company’s finances is essential, but other skills accountants should possess are: 

  • Attention to detail
  • Adaptability 
  • High level of competency with Excel and other accounting software (like Quickbooks)
  • Data modeling
  • Knowledge of accounting-specific calculations and formulas (such as the current ratio formula) 

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McKayla Girardin is a NYC-based writer with Forage. She is experienced at transforming complex concepts into easily digestible articles to help anyone better understand the world we live in.

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