What are Assets ? What are Types of Assets ?

Assets are resources owned or controlled by a company, which will be utilized to generate future cash flows.

Assets are application of funds in the balance sheet. For 1 rupee spent on the sources of fund side there will be 1 rupee on the application of fund side (Assets).

Assets can be classified as different types on the basis of their characteristics.

//Based On Physical Existence

1. Tangible Assets: Assets with physical existence (we can touch, feel, and see them). 

Examples : Land, PPE, Cash, Inventory, Marketable securities

 

2. Intangible Assets : Assets with no physical existence. 

Examples : Goodwill, Patents, Brand, Copyrights, Trademarks, Trade secrets, Licenses and permits, IP

 

// On The Basis Of Usage

1. Operating Assets : Assets required for daily operation. These assets generate revenue for company’s core business activities ( total sales of a company). 

Examples : Cash, Accounts receivable, Inventory, PPE, Patents, Copyrights, Goodwill

 

2. Non-Operating Assets : Assets that are not required for daily business operations but can still generate revenue ( other income of a company ).

Examples : Short-term investments, Marketable securities, Vacant land, Interest income

// Based On Convertibility Into Cash

1. Current Assets Or Liquid Assets : Assets that can be easily converted into cash and cash equivalents (typically within a year).

Example : Cash, Cash equivalents, Short-term deposits, Accounts receivables, Inventory

 

2. Fixed Assets or Non-Current Assets or Hard Assets : Assets that cannot be easily converted into cash and cash equivalents.

Example : Land, Building, Machinery, PPE