HomeKnowledge BaseAWhat Is an Asset? Definition, Types, and Examples

What Is an Asset? Definition, Types, and Examples

Asset Definition

An asset can be broadly defined as any valuable and useful resource or item that contributes to an individual's or an organization's overall worth. It is fair to say that people have personal assets such as cash, bank savings, bonds, life insurance policies, art, cars, jewelry, and valuable collectibles. Even an individual's talents and skills can be considered an asset.

In a business environment, an asset is a resource owned or managed by a person, organization, or even government, with the hope that this will bring positive economic benefits over some time. Assets can be physical, intangible, current, non-current, operating, or non-operating, and they often represent a net gain in value for the entity that owns or controls them.

Asset Categories

There are three main asset categories, each with its unique characteristics and functions. 

  1. Based on Convertibility assets mean how easily an asset can be converted into cash. This type includes current and non-current (fixed) assets. 
  2. Based on Physical Existence type includes tangible and intangible assets.
  3. Based on Usage / Purpose in business. These include operational and non-operational assets.

Assets Based on Convertibility

Current Assets | Short-term Assets

These are assets that can be converted into cash or cash equivalents within a year through sale or account payments. Companies typically use current assets to pay for daily operations and other short-term expenses. Some examples of current assets are:

  • cash
  • inventory 
  • short-term deposits
  • prepaid expenses

Fixed or Non-Current Assets | Long-term Assets

Non-current assets are long-term investments that a company does not expect to convert into cash within a year. These assets often have a useful life of more than one year and are crucial for the long-term growth and sustainability of a business. Examples of fixed assets are: 

  • building 
  • land
  • equipment 
  • trademarks

Assets Based on Physical Existence 

Tangible Assets | Physical Assets

Tangible assets, also known as physical assets, have a physical presence and can be touched or seen. They include items such as: 

  • land
  • buildings
  • machinery
  • vehicles
  • office supplies

Intangible Assets

Intangible assets lack a physical presence, so you can’t see or touch it. These often hold value based on the rights, privileges, or competitive advantages they provide. Examples of intangible assets include:

  • patents
  • trademarks
  • customer data
  • author's rights
  • goodwill
  • licenses

Assets Based on Usage

Operating Assets

These are assets that are directly involved in the daily operations and revenue generation of a business. Some of the examples of operating assets are: 

  • cash
  • accounts receivable
  • inventory
  • production equipment
  • employees
  • buildings 

Non-Operating Assets

Non-operating assets are not directly involved in a business's core operations but may still generate income or have a future use. Examples include: 

  • investment properties 
  • marketable securities
  • unused or broken equipment or machinery 

Some Facts To Learn

  • Assets generate economic value and future benefits: They can produce revenue, reduce expenses, or increase cash flow for individuals, organizations, or governments.
  • Assets are recorded on balance sheets: They are part of the accounting equation (Assets = Liabilities + Equity) and help assess a company's financial wellbeing.
  • Asset ownership can be transferred or used as collateral: Individuals and businesses can sell or transfer assets, and they can be used as security for obtaining loans, reducing the risk for lenders and ensuring timely repayment of borrowed funds. Common examples of collateral include real estate, vehicles, inventory, accounts receivable, and cash equivalents.

Examples Of Assets

Various types of assets can be owned or controlled by individuals, businesses, or governments. Some common examples include:

  • Land: A piece of property or real estate that can be used for various purposes, such as agricultural production, residential development, or commercial operations.
  • Building: A constructed structure, such as a residential home, office building, or warehouse, used for living or business purposes.
  • Inventory: Goods or materials held by a company for sale, production, or consumption in the ordinary course of business.
  • Goodwill: An intangible asset representing the value of a company's reputation, brand, customer relationships, and other factors that contribute to its ability to generate future profits.
  • Cash: Money held by a company or individual, either in physical form or in a bank account.
  • Bank: Financial institutions, such as banks or credit unions, where individuals or businesses can deposit money or take out loans.
  • Preliminary Expenses: Costs incurred before a business starts its operations, such as legal fees, registration fees, or market research costs.

In conclusion, understanding assets is crucial for individuals and businesses alike, as they represent resources with economic value that can provide future benefits. Assets can be classified into various types, including tangible, intangible, current, and non-current, among others. By recognizing the different classes of assets and their respective examples, individuals and organizations can effectively manage their resources, make informed decisions, and optimize their financial growth and stability.


What is the difference between assets and liabilities?

Assets represent a company's resources, while liabilities represent a company's obligations. An asset helps determine what a company owns, while liabilities show what a company owes.

Can personal assets include skills and abilities?

Yes, a person's skills and abilities can be considered personal assets, as they can provide economic value and benefit the individual in their personal or professional life.

How are assets recorded on a balance sheet?

Assets are recorded under different categories on the balance sheet, such as current assets, fixed assets, and tangible assets. They can be recorded using the market value method or the cost method, depending on the accounting approach.

Can assets be used as collateral for loans?

Yes, assets can be used as collateral to secure loans. Borrowers can pledge their assets, such as property or investments, to lenders as a guarantee of repayment, reducing the risk for the lender.

How do assets contribute to a company's financial health?

Assets contribute to a company's financial health by providing resources that can generate revenue, reduce expenses, or increase the overall value of the business. A strong balance sheet with a diverse range of assets can indicate a financially stable company.

Are employees considered assets to organizations? 

Employees are considered as assets to an organization because they bring valuable skills, knowledge, and experience, contributing to the company's success and helping achieve its objectives. While they are not considered assets on a balance sheet, their importance to an organization's overall performance is undeniable.

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