Different Types of Assets

Types of Assets

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

1. Current Asset

They can be easily converted into cash and cash equivalents (typically within a year). These are also termed liquid asset and examples of such are:

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

2. Fixed or Non-Current Asset:

They provide the firm with long-term financial gain as they have a useful life of more than one year. They are also known as a capital assets and are denoted by the terms Property, Plant, and Equipment in the balance sheet.

Examples:

  • Land
  • Building
  • Machinery
  • Equipment
  • Patents
  • Trademarks

Classification of Physical Existence

They are classified as tangible or intangible assets.

1. Tangible Asset: With physical existence, we can touch, see them. Examples include:

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

2. Intangible Asset: They don’t have physical existence. Examples include:

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

Classification of Usage

They are classified based on their usage or purpose, These are classified as operating or non-operating assets.

1. Operating Asset: These are required in the daily operation of a business. In other words, They are used to generate revenue from a company’s core business activities. Examples:

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

2. Non-Operating Asset: These are not required for daily business operations but can still generate revenue. Examples include:

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

List of Liquid Assets

  • Cash in Hand
  • Money in Bank
  • Cash Equivalents
  • Accrued Income
  • Promissory Notes
  • Government Bonds
  • Stocks
  • Marketable Securities
  • Account Receivable
  • Certificates of Deposit
  • Tax Refunds

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