Assets (Accounting) - Explained
What are Assets?
Written by J. Mance Gordon
Updated at April 18th, 2024
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What is an Asset?
Assets are everything that we own. By definition, these are the resources that a company owns or controls. So, if we own it or control it, it's an asset. According to GAAP, an asset must be:
- Controlled by the company,
- The result of a past transaction, and
- Result in a future benefit to the corporation.
What are Long-term and Short-Term Assets?
Long-term assets will generally remain on-hand for more than one operating cycle or more than 12 months.
Current Assets (Short-term assets) will generally be used, liquidated (converted into cash), or other disposed of within one operating cycle or within 12 month period.
What are Tangible and Intangible Asset?
An asset can by a tangible (physical) asset, or it can be intangible (intellectual property or other rights).
Examples of Assets
The cash in your wallet or your pocketbook is an asset to you because you own it or you control it. The computer or phone you're watching this on is an asset to you. This are both examples of tangible assets.
An intangible asset might include intellectual property rights (such as a patent, trademark, copyright, etc.). It might also include contractual rights, name recognition, goodwill, etc.
The most commonly recognized assets in accounting include:
- Cash
- Short-term investments
- Accounts Receivable (owning someone's debt)
- Supplies
- Property, Plant, and Equipment
These are resources that are expected to produce some kind of future benefit to the company. The benefit could be cash from an investment or using a vehicle to transport people or goods.