assets in accounting

In accounting, assets are resources owned or controlled by a company that are expected to bring future economic benefits.

📘 Definition

Assets are items of value that a business owns or uses to generate income.

These can be tangible (like equipment) or intangible (like patents).

🧾 Types of Assets
1. Current Assets (short-term, expected to be used or converted to cash within 12 months)
Examples Description
Cash Currency, bank balances
Accounts Receivable Money owed by customers
Inventory Goods available for sale
Prepaid Expenses Payments made in advance (e.g., insurance)
Short-term Investments Investments that can be quickly liquidated
2. Non-Current (Fixed) Assets (long-term, used over many periods)
Examples Description
Property, Plant & Equipment (PP&E) Land, buildings, machinery
Intangible Assets Non-physical (patents, trademarks, goodwill)
Long-term Investments Stocks, bonds, real estate held > 1 year
Deferred Tax Assets Overpaid taxes that can reduce future tax
📊 Classification on the Balance Sheet

Assets are listed on the left side (or top) of the balance sheet and usually ranked by liquidity (ease of converting to cash):

Assets
├─ Current Assets
│ ├─ Cash
│ ├─ Accounts Receivable
│ └─ Inventory
└─ Non-Current Assets
├─ Equipment
├─ Buildings
└─ Intangible Assets

📌 Key Concepts
Term Meaning
Liquidity How quickly an asset can be converted to cash
Depreciation Allocation of cost of tangible assets over time
Amortization Similar to depreciation, but for intangible assets
Capitalization Recording a cost as an asset rather than an expense
📐 Example

A company buys a delivery van for ₹10,00,000:

This is a non-current asset (fixed asset).

It appears on the balance sheet under vehicles.

Each year, depreciation is recorded (say ₹2,00,000/year), reducing the book value of the asset.