Assets – Meaning, Definition, Types and Examples

Meaning of Assets

The assets are those valuable things or properties which the business or individual owns and get the benefits from it in future or use it in generating income.  The tangible objects and the intangible right owned by the business enterprises are known as an asset. 

In the Balance sheet assets are shown on the net value. It means total historical Cost minus Depreciation

Know the formal Definition.

Example for business:-

  • Cash balance,
  • Bank balance,
  • Trade Receivable,
  • Marketable Securities, 
  • Advance paid to the employees or Vendors, 
  • Investment,
  • Plant and Machine,
  • Land and building,
  • Furniture and Fixture,
  • Vehicles,
  • Computers,
  • Software,
  • Trademarks,
  • Copyrights,
  • Patents 
  • Employees

Example for Individual:-

  • Cash balance,
  • Bank balance or Fixed Deposit,
  • Investment in Shares, Mutal Fund, etc.
  • Agriculture Land 
  • House 
  • Jewellery

Type of Assets: –

All assets can be classified into three types as follows: 

  1. Fixed Asset 
  2. Current Asset
  3. Fictitious Asset (It is an unclaimed expense treated as an asset in the balance sheet)

So mainly assets are two types. these two types can be further classified on the following bases of: –

  1. Life of an asset
  2. Existence of an asset 
  3. Usage of an asset

1. Classification on the bases of Life of an asset : –

The assets can be classified on the bases of their life cycle. it can be divided into the two categories shown as following: 

1) Fixed Asset:- 

Those assets on which the business get benefits for a long period of time minimum of one year are known as Fixed Asset. These are also known as long term asset or non-current asset.

Examples are as follows: –

  • Land and Building 
  • Furniture and Fixture 
  • Plant and Machine

2) Current Asset:-

Those assets on which the business get benefits for a short period of time, a maximum of one year are known as Current Asset. These are also known as short term asset. 

Examples as follows: –

  • Cash 
  • Bank
  • Stock 
  • Bills Receivable
  • Prepaid Expenses 

2. Classification on the bases of Existence of an asset: –

The assets can be classified on the bases of their Existence. it can be divided into the two categories shown as following: 

1)  Tangible asset:- 

Those assets which can be touch, feel, and see are called Tangible asset.

Examples are as follows: –

  • Cash 
  • Bank
  • Stock 
  • Land and Building 
  • Furniture and Fixture 
  • Plant and Machine

2) Intangible Asset: –

Those assets which cannot be touch, feel, and see are called Intangible asset.

Examples are as follows: –

  • Goodwill 
  • Softwares 
  • Patents 
  • Trademarks
  •  Copyright

3. Classification on the bases of Usage of an asset:

The assets can be classified on the bases of their Usage. it can be divided into the two categories shown as following: 

1) Operating Asset:- 

Those assets which are used to generate operating income for the business or which are required to run daily business activities. 

Examples are as follows: –

  • Cash 
  • Bank
  • Stock 
  • Land and Building 
  • Furniture and Fixture 
  • Plant and Machine

2) Non-Operating Asset:-

Those assets which are not used to do the operating activities of the business but which are generating some non-operating income for the business. 

Examples are as follows: –

  • Fixed Deposit
  • Marketable Securities 
  • Land and Building letting out.

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