{"id":1955,"date":"2022-11-22T12:00:00","date_gmt":"2022-11-22T17:00:00","guid":{"rendered":"https:\/\/theforage.wpengine.com\/?p=1955"},"modified":"2024-07-22T17:34:20","modified_gmt":"2024-07-22T21:34:20","slug":"asset","status":"publish","type":"post","link":"https:\/\/theforage.wpengine.com\/skills\/asset","title":{"rendered":"What Is an Asset? Definition and Examples"},"content":{"rendered":"\n

Assets are resources that either an individual or a company uses. Someone’s personal assets may consist of their work experience or a life insurance policy, while a business’s assets include things  the company can use to generate revenue<\/a>, like inventory or employees. <\/p>\n\n\n\n

Asset Definition<\/h2>\n\n\n\n

An asset is typically 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. <\/p>\n\n\n\n

In business, though, assets need to provide positive economic value \u2014 the resource must create or produce something that the company can sell for cash, or the resource itself must hold resale value. <\/p>\n\n\n\n

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.<\/p>\n\n\n\n

Who Needs to Know About Assets?<\/h3>\n\n\n\n

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

Types of Assets<\/h2>\n\n\n\n

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. <\/p>\n\n\n\n

Conversion to Cash<\/h3>\n\n\n\n

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. <\/p>\n\n\n\n

Current Assets<\/h4>\n\n\n\n

Current assets are very liquid \u2014 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 them or selling them. <\/p>\n\n\n\n

Some examples of current assets include: <\/p>\n\n\n\n