Assets

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An asset is a resource that has economic or financial value. An asset can be perceived as anything that can generate value or cash, help reduce expenses, or has the potential to boost sales in the future. An individual, organisation/company, and the country has ownership and control of the asset, with the expectation that it will provide a future benefit either because of its value going up or it being just a good investment.

An asset, therefore, signifies an economic resource for a company or access to the resource. It follows that the right over a resource or access to it is legally enforceable. This right to resource means the owner of these assets or economic resources can use them at the discretion of the company. As per financial accounting terms, an asset is a resource that a business entity owns or controls.

 

Assets:

  • Can be tangible or intangible.

  • Are reflected in the balance sheet and part of the Annual Report of a Company.

  • Are purchased or created to assist the company's operations and increase its value in the future (the value is dependent on prevalent market dynamics).

  • Characterises the value of ownership that can be cashed when required.

Assets can be broadly categorised as tangible assets and intangible assets:

1) Tangible assets

Tangible assets are physical resources. They are:

  • Current Assets: Current assets are short-term economic resources, generally converted into cash within one year. Current assets include Cash, Inventory, and funds receivable.

  • Fixed assets: Fixed assets are long-term economic resources and include land, buildings, factories/plants, and Equipment. While accounting for fixed assets, a provision is made for their ageing and losing value through periodic charges termed Depreciation.

2) Intangible assets

Intangible assets are nonphysical resources and ownerships rights that provide value to an organisation or company through their ability to give an advantage in the marketplace. They include:

  • Trademarks

  • Patents

  • Copyrights

  • Computer programs

  • Financial instruments, Bonds, and Stocks

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