Asset Details

Companies use assets to generate income. When a company has many assets, it's usually considered to be doing well since it has a higher number of income channels. A company can generate income from assets either by selling them or using them to facilitate income generation. Stock or inventory is an example of an asset that can be sold to generate income. Examples of assets that facilitate the generation of income are furniture, machinery, and land.

Assets are what the company owns or the belongings of a company. Assets are considered to be physically owned by a company to use for their own benefit. Some of the assets are already a company's property, while other assets have a value that's counted as property. An example of an asset would be accounts receivable.

Companies usually acquire assets from prior events or prior transactions. Before a company owns an asset, certain events need to have taken place. Such events and transactions could be buying, manufacturing, or lending. A company has to buy land to own it, but a company can produce its own inventory and later sell it or lend money to borrowers who will refund it later.

Types of Assets

Assets can be categorized into different categories depending on their longevity, physical existence, and the purpose that the asset serves. Assets can be categorized as tangible assets or intangible assets. Under how long the assets last, fixed assets or current assets. Lastly, under the purpose, there are operating assets and non-operating assets.

  1. ​Tangible assets. Tangible assets are the type of assets that can be seen or touched or assets that have a physical existence. Examples of tangible assets are stock, cash, furniture, machinery, plant property, and equipment.
  2. Intangible assets. Intangible assets aren't tangible. They can't be seen or physically touched. Examples of intangible assets could include charitable donations, client accounts, or trade secrets.
  3. Fixed assets. Fixed assets are assets that last for more than one year in a company. Fixed assets are also known as long-term assets due to the long duration of time. Examples of fixed assets are machinery, furniture, patents, plant property, and equipment.
  4. Current assets. Current assets are assets that usually last for less than a year in an organization or company. Current assets are also known as short-term assets since they're used for the company's day-to-day activities. Examples of current assets are stock, cash in hand, cash at bank, debtors, and pre-paid liabilities.
  5. Operating assets. Operating assets are assets used to generate income through the organization's daily activities or core activities. Examples of operating assets are cash, inventory, building, machinery, and equipment.
  6. Non-operating assets. Non-operating assets aren't usually used in the daily income generation in the business. Non-operating assets, however, help in generating significant revenue. Examples of non-operating expenses are vacant land, marketable securities, and short-term investments.

Assets vs. Liabilities

Liabilities are items that take money from an individual, company, business, or organization. From a company's point of view, assets generate or help generate income, whereas liabilities take away income from the company. Stock, an example of an asset is sold. This generates income while creditors, who are liabilities, take away money from the company after the payment is made.

Assets are the company's property, or what the company owns, whereas liabilities are what the company owes to another party. All assets are considered to be a company's property and can be used as pleased. Liabilities are what the company ought to pay and are therefore not something that belongs to the company

For a company to be operating well, the value of assets needs to be higher than the value of liabilities. When the value of assets is high, it shows the company's ability to pay its debts. When the liabilities value of a company is higher than the asset value, the company could be performing poorly since it shows the company's inability to pay debts.