Assets are items that have value, which can be measured monetarily. There are two types of assets: tangible and intangible. Tangible assets, or touchable assets, are real, physical objects such as equipment, raw materials, furniture, and land. Intangible assets may represent something of economic value that is not cash or a physical item or place. Examples include patents, copyrights, trademarks, franchises, leases, technical expertise, and goodwill. Intangible assets represent long-term rights that have future value to a business. For instance, a copyright gives the owner the right to publish a literary or artistic work for the life of the creator plus 50 years. Goodwill is an intangible asset because it represents the amount of money over the fair market value paid by the buyer to the seller in expectation of the ability of a business to generate higher than normal earnings.
Assets can also be divided in two ways—current and non-current. A current asset is cash or something that can be converted quickly into cash (usually under one year). Current assets may include marketable securities, notes receivable (formal written promises to receive a fixed amount of money at a future date of less than one year) and accounts receivable (money due from customers for services rendered) less allowance for uncollectables, inventory, supplies and prepaid items.
A non-current asset can be either tangible or intangible. A non-current tangible asset is something of value such as land, equipment, machinery, furnishings, or buildings, which is used to produce a good or service. The benefit of a non-current asset usually extends more than a year and cannot be quickly liquidated. The value of a non-current intangible asset such as a patent is spread out over a number of years. This cost is called amortization. An asset is no longer an asset when it stops being economically viable to its owner.
Emery, Douglas R., and John D. Finnerty. Principles of Finance with Coroprate Applications. New York: West Publishing Company, l991.
Hillman, A. Douglas et.al.. Principles of Accounting. Sixth Ed. New York: The Dryden Press/Harcourt Brace Jonanovich College Publishers, 1991.
Marshall, David H. A Survey of Accounting: What the Numbers Mean. Second edition. Boston: Richard D. Irwin, Inc., 1993.
Montgomery, A. Thompson. Financial Accounting Information: An Introduction to Its Preparation and Use. Reading, PA: Addison-Wesley Publishing Company, l982.
Rachlin, Harvey. The Money Encyclopedia. New York: Harper & Row, Publishers, l984.
Real orpersonal property, whether tangible or intangible, that has financial value and can be used for the payment of its owner's debts.
An accrued asset is one that arises from revenue earned but not yet due. For example, an accrued dividend is a share of the net earnings of a corporation that has been declared but has not yet been paid out to its shareholder(s).
In bankruptcy, an asset is any form of property owned by a debtor who is insolvent that is not exempt from being used to repay debts.
For income tax purposes, a capital asset is property held by a taxpayer for personal enjoyment or investment, such as a home, furniture, stocks and bonds, or an automobile, but does not include inventory, commercial accounts, and notes receivable, depreciable property, commercial property, copyrights, and short-term government obligations. When a capital asset is sold, any gain received is given preferential tax treatment.
A current, liquid, or quick asset is an item that can be readily converted to cash, such as stocks and bonds.
A fixed asset is one of a permanent or longterm nature used in the operation of a business and not intended for sale.
A frozen asset is one that cannot be easily converted into cash, such as real estate when there is no market, or that cannot be used because of a legal restriction, such as a spend-thrift trust.
An intangible asset is one to which an arbitrary dollar value is attached because it has no intrinsic market value but represents financial value, such as the good will of a business, trademarks, or patents.
as·set / ˈaset/ • n. a useful or valuable thing, person, or quality: the school is an asset to the community. ∎ (usu. assets) property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies: growth in net assets. ∎ (assets) military equipment, such as planes, ships, communications and radar installations, employed or targeted in military operations.