Everything you should Know about an Asset

An asset is anything which is owned or controlled expecting that it will provide benefits in future. Examples of assets are land, buildings, equipment, inventory, plants, patents, trademarks, and software.

An asset is anything that you own or can earn money on.

For individuals, asset is any item that is in your possession. For example your money, car, house, your phone and your belongings.

Types of asset

There are various types of assets depending upon the nature and specific features it posses.

  • A financial asset is an item or collection of items such as bank accounts and stocks – A financial asset must have monetary value
  • Material assets, the things that you own and manage in your organization
  • Digital assets, the information that you produce, create or process.
  • Physical assets, the buildings and facilities that house employees

Current Assets

Current assets are the cash and cash equivalents, accounts receivable, and inventories that you have on hand at a certain time. It also include short-term investments that a company holds to sale in near future. Also, the expenses that a company has incurred in advance (prepaid expenses) are also considered as current assets. 

Fixed Assets

These are any property that has a useful life beyond the normal operating cycle of the business such as plant, machinery, buildings etc. Another term used to refer fixed assets is PPE (Property, plant and Equipment). The purpose to acquire fixed asset is to utilize such assets to earn profits in long term.

Intangible Assets

In accounting, an intangible asset is an asset that has no physical or real property form. Examples of intangible assets are good will, a trade name, brand name, and patents.

Tangible assets

Tangible assets are those that can be touched. Tangible assets are also referred to as fixed assets, such as buildings, equipment, vehicles, machines, and tools. These assets remain constant over time.

What asset cannot be depreciated

Land is an asset which cannot be depreciated. Also, the current assets don’t tend to depreciate because these are convertible to cash after short period of time.

For an individual, assets such as art collectibles, coins and investment in stocks cannot be depreciated. 

What is a digital asset

Digital asset refers to a non-physical item such as the intellectual property rights associated with a business.

Digital assets may be things like text documents, photos, music, videos, programs, apps, and even virtual money.

 What is net asset value?

Net asset value comes when we deduct all liabilities from the total assets. 

Net Asset Value (NAV) is defined as the present value of a company’s total assets minus total liabilities. If a company has no debt, then the NAV is the book value of the company.

What is a contra asset?

A contra asset account is an allowance that company makes against an asset. Basically it reduces the balance of the asset. Examples include allowance for doubtful debts and accumulated depreciation.

What is asset turnover?

It is a ratio that represents how fast a company’s assets are being converted into cash. Basically, it’s a measure of the efficiency of a company’s operations and cash flow.

Asset turnover measures the rate at which the assets of an organization change hands. It’s a way to measure how frequently money or other assets are passing through an organization.

Final words

An asset is anything that you own or control. It’s not just about what you’ve got. It’s about what you can do with it. You need to think about your assets and how they can help you grow your business. This could be a physical asset, like a car. It could also be something intangible, like knowledge, contacts, or even ideas.

We hope that you have enjoyed reading our guide. Please let us know your valuable thoughts and let us know how you see and value an asset.

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