What Is an Asset? (2024)

An asset is anything of value or a resource of value that can be converted into cash. Individuals, companies,and governments own assets. For a company, an asset might generate revenue, or a company might benefit in some way from owning or using the asset.

Personal Assets

Personal assets are things of present or future value owned by an individual or household. Common examples of personal assets include:

• Cash and cash equivalents,certificates of deposit, checking, and savings accounts, money market accounts, physical cash, Treasury bills
• Property orland and any structure that is permanently attached to it
• Personal property—boats, collectibles, household furnishings, jewelry, vehicles
• Investments—annuities, bonds, the cash value of life insurance policies, mutual funds, pensions, retirement plans, (IRA, 401(k), 403(b), etc.) stocks

Your net worth is calculated by subtracting your liabilities from your assets. Essentially, your assets are everything you own, and your liabilities are everything you owe. A positive net worth indicates that your assets are greater in value than your liabilities; a negative net worth signifies that your liabilities exceed your assets (in other words, you are in debt).

Business Assets

For companies, assets are things of value that sustain production and growth. For a business, assets can include machines, property, raw materials, and inventory—as well as intangibles such as patents, royalties, and other intellectual property.

The balance sheet lists a company's assets and shows how those assets are financed, whether through debt or through issuing equity. The balance sheet provides a snapshot of howwell a company's management is using its resources. There are two types of assets on a typical balance sheet.

Current Assets

Current assets are assets that can be converted into cash within onefiscal yearor one operating cycle. Current assets are used to facilitate day-to-day operational expenses and investments.

Examples of current assets include:

• Cash and cash equivalents:Treasury bills, certificates of deposit, and cash
• Marketable securities:Debt securities or equity that is liquid
• Accounts receivables:Money owed by customers to be paid in the short-term
• Inventory: Goods available for sale or raw materials

Fixed Assets

Fixed assets are long-term assets, or non-current assets. Tangible fixed assetsare those assets with a physical substance and are recorded on the balance sheet and listed asproperty, plant, and equipment(PP&E). Intangible fixed assets arethose long-term assets without a physical substance, for example, licenses, brand names, and copyrights.

Examples of fixed assets include:

• Vehicles (such as company trucks)
• Office furniture
• Machinery
• Buildings
• Land

The two key differences with business assets are non-current assets (like fixed assets)cannot be convertedreadily to cash to meet short-term operational expenses or investments. Conversely, current assetsare expected to be liquidated within one fiscal year or one operating cycle.