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    Examples of Assets

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    Luise Mauie
    This document defines assets and describes three common ways they are classified: by convertibility, physical existence, and usage/purpose. Assets are classified as current/fixed, tangible/intangible, or operating/non-operating. Current assets can be converted to cash within a year, while fixed assets cannot. Tangible assets have physical form, while intangible assets do not. Operating assets generate revenue from core business activities, whereas non-operating assets generate supplemental revenue. Properly classifying assets is important for understanding a company's financial position and performance.

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    Examples of Assets

    Uploaded by

    Luise Mauie
    31 views3 pages
    This document defines assets and describes three common ways they are classified: by convertibility, physical existence, and usage/purpose. Assets are classified as current/fixed, tangible/intangible, or operating/non-operating. Current assets can be converted to cash within a year, while fixed assets cannot. Tangible assets have physical form, while intangible assets do not. Operating assets generate revenue from core business activities, whereas non-operating assets generate supplemental revenue. Properly classifying assets is important for understanding a company's financial position and performance.

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    Examples of assets

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    This document defines assets and describes three common ways they are classified: by convertibility, physical existence, and usage/purpose. Assets are classified as current/fixed, tangible/intangible, or operating/non-operating. Current assets can be converted to cash within a year, while fixed assets cannot. Tangible assets have physical form, while intangible assets do not. Operating assets generate revenue from core business activities, whereas non-operating assets generate supplemental revenue. Properly classifying assets is important for understanding a company's financial position and performance.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    31 views3 pages

    Examples of Assets

    Uploaded by

    Luise Mauie
    This document defines assets and describes three common ways they are classified: by convertibility, physical existence, and usage/purpose. Assets are classified as current/fixed, tangible/intangible, or operating/non-operating. Current assets can be converted to cash within a year, while fixed assets cannot. Tangible assets have physical form, while intangible assets do not. Operating assets generate revenue from core business activities, whereas non-operating assets generate supplemental revenue. Properly classifying assets is important for understanding a company's financial position and performance.

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    © All Rights Reserved
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    of 3

    Examples of assets include:

     Cash and cash equivalents


     Accounts Receivable
     Inventory
     Investments
     PPE (Property, Plant, and Equipment)
     Vehicles
     Furniture
     Patents (intangible asset)

    Properties of an Asset

    There are three key properties of an asset:

     Ownership: Assets represent ownership that can be eventually turned into cash


    and cash equivalents
     Economic Value: Assets have economic value and can be exchanged or sold
     Resource: Assets are resources that can be used to generate future economic
    benefits

    Classification of Assets

    Assets are generally classified in three ways:

    1. Convertibility: Classifying assets based on how easy it is to convert them into


    cash.
    2. Physical Existence: Classifying assets based on their physical existence (in other
    words, tangible vs. intangible assets).
    3. Usage: Classifying assets based on their business operation usage/purpose.

    Classification of Assets: Convertibility

    If assets are classified based on their convertibility into cash, assets are classified as
    either current assets or fixed assets. An alternative expression of this concept is short-
    term vs. long-term assets.

    1. Current Assets

    Current assets are assets that can be easily converted into cash and cash equivalents
    (typically within a year). Current assets are also termed liquid assets and examples of
    such are:

     Cash
     Cash equivalents
     Short-term deposits
     Accounts receivables
     Inventory
     Marketable securities
     Office supplies

    2. Fixed or Non-Current Assets

    Non-current assets are assets that cannot be easily and readily converted into cash and
    cash equivalents. Non-current assets are also termed fixed assets, long-term assets, or
    hard assets. Examples of non-current or fixed assets include:

     Land
     Building
     Machinery
     Equipment
     Patents
     Trademarks

    Classification of Assets: Physical Existence

    If assets are classified based on their physical existence, assets are classified as
    either tangible assets or intangible assets.

    1. Tangible Assets

    Tangible assets are assets with physical existence (we can touch, feel, and see them).
    Examples of tangible assets include:

     Land
     Building
     Machinery
     Equipment
     Cash
     Office supplies
     Inventory
     Marketable securities

    2. Intangible Assets

    Intangible assets are assets that lack physical existence. Examples of intangible assets
    include:

     Goodwill
     Patents
     Brand
     Copyrights
     Trademarks
     Trade secrets
     Licenses and permits
     Corporate intellectual property

    Classification of Assets: Usage


    If assets are classified based on their usage or purpose, assets are classified as
    either operating assets or non-operating assets.

    1. Operating Assets

    Operating assets are assets that are required in the daily operation of a business. In other
    words, operating assets are used to generate revenue from a company’s core business
    activities.  Examples of operating assets include:

     Cash
     Accounts receivable
     Inventory
     Building
     Machinery
     Equipment
     Patents
     Copyrights
     Goodwill

    2. Non-Operating Assets

    Non-operating assets are assets that are not required for daily business operations but can
    still generate revenue. Examples of non-operating assets include:

     Short-term investments
     Marketable securities
     Vacant land
     Interest income from a fixed deposit

    Importance of Asset Classification

    Classifying assets is important to a business. For example, understanding which assets


    are current assets and which are fixed assets is important in understanding the net
    working capital of a company. In the scenario of a company in a high-risk industry,
    understanding which assets are tangible and intangible helps to assess its solvency and
    risk.

    Determining which assets are operating assets and which assets are non-operating assets
    is important to understanding the contribution of revenue from each asset, as well as in
    determining what percentage of a company’s revenues comes from its core business
    activities.

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