What Is an Asset? Definition, Types, and Examples

This includes cash, equipment, property, rights, or anything that helps a company generate revenue or reduce expenses. An asset can be anything that provides a current or potential future economic benefit to whoever possesses or controls that asset. Simply put, an asset is something of value that you own or that is owed to you. If you lend money to someone, that loan is also an asset because you are due that amount. Some assets are recorded on companies’ balance sheets using the concept of historical cost. It represents the original cost of the asset when purchased by the company and can also include expenses (such as delivery and set up) incurred to incorporate an asset into the company’s operations.

• He was later sued by his lawyers in London for failing to pay $419,400 in counsel fees when his assets were frozen.
• Sensitive data and intellectual property are often at risk when security isn’t tight.
• Your net worth is calculated by subtracting your liabilities from your assets.
• Understanding the difference between digital assets and digital footprints is essential because digital interactions shape much of our work.
• A company’s assets, such as inventory, equipment, or patents, are more likely to be used to generate revenue.

Assets vs. Liabilities

Accounts receivable is the acknowledgement that the customer owes the company money for the goods. In our short example, we saw three ways three different assets were acquired. First, the company acquired equipment by a contribution from its owners. Second, the company used its own assets to purchases more assets when it bought additional equipment with its cash.

Real-World Example of Financial Assets

Let’s take a look at a common list of assets and a assets-liabilities=equity few examples in each class. Now that you know how assets are acquired, let’s look at how they are classified. For example, property in a prime neighborhood will be more expensive as compared to property in one that is situated in a depressed area. The process to determine the valuation for each of these asset types varies.

What Are Examples of Assets?

What’s important is knowing what your net worth is and tracking how it changes over time. “Assets are listed on a balance sheet to show how they were accumulated,” says Berger. “This helps companies keep track of what they own and can sell within a fiscal year or what can be sold in the future once its value appreciates.” People tend to keep assets to build bookkeeping wealth to retire or use them as a financial resource.

Once these resources are used or spent, they are transferred from the balance sheet to the income statement and called expenditures. For example, cryptocurrencies are code and do not have a physical manifestation unlike hard cash. They are known as investment assets and, depending on whether they are used to multiply profits or generate consistent income, can be categorized as growth assets or defensive assets. The economic value provided by long-term assets is typically used to pay long-term liabilities. Current assets are assets that have a ready market for exchange and liquidation.