ASSETS:-
An asset is a resource that has some economic value to a company and can be used in a current or future period to generate revenues. These resources take many forms from cash to buildings and are recorded on the balance sheet until they are used. Once these resources are used or spent, they are transferred from the balance sheet to the income statement and called expenditures.
The term ‘asset’ signifies all kinds of resources that help generate revenue as well as receivables. Assets are resources which often help to reduce expenses, enhance profitability and generate robust cash flow as they help convert raw materials or can be converted into cash or cash equivalents. Further, being of economic value, they can be quickly sold or exchanged. Notably, such resources are reported on the left side of the Balance Sheet that is maintained by any entity involved in commercial practice.
Generally, the sum of total liabilities and equities owned helps compute the value of assets. Consequently, it can be said –
Formula: Total assets = Liabilities (accounts payable) + Owner’s equity
TANGIBLE ASSETS:-
Understanding tangible assets is very easy. Anything that can be touched is tangible. Tangible Assets are assets that have a physical presence and can be felt and touched. The main distinction between tangible and intangible assets is that one can be touched while the other exists only on record and balance sheet. In simpler words, an asset is a piece of property owned by an individual or organization which is recognized as having value and is available to meet obligations.
Fixed and Current assets are two types of this asset.
Current Assets
Current assets are items such as inventory, cash, liquid financial instrument, or securities. These items are generally used within a year or two. They can be quickly converted into cash for emergencies.
Fixed Assets
The non-current assets that a business entity uses in its operations for more than a year or two. On the balance sheet, they go under Property, Plant, and Equipment (PP&E) section. The example of fixed assets is buildings, lorry (vehicles), machinery, furniture, etc. Fixed assets generate revenue, which is necessary for running the business operations.
Examples of Tangible assets
- Land.
- Computers
- Furniture
- Stocks
- Machines
Intangible Assets:
Intangible assets, the polar opposite of tangible assets, do not have a physical reality and cannot be touched or felt. Depending on the type of asset, they are definite or indefinite intangible assets. A patent is a definite intangible asset as it will expire after the patent is over, however, a company’s brand name will remain over the course of the company’s existence.
Examples of Intangible assets:
- Trademarks
- Brand name
- Logo
- Copyright
- Goodwill
- Patents
An example of a definite intangible asset is a company patent because it will expire once the patent term expires. On the contrary, a firm brand name will remain throughout its existence.
