Types of an Asset
Assets are classified into 4 main types, i.e. current, intangible, fixed, and financial assets.
Current Assets
Current assets are also often referred to as short-term assets in accounting terms, as current assets are held by a company for a short period (1 year) which is then converted into cash. The current assets of a company include cash reserves, inventory, prepaid expenses, accounts receivable, etc.
Intangible Assets
Intangible assets are some of the assets, that do not have a physical presence but are still quite valuable for a company. Some of the intangible assets that the company holds are its copyrights, patents, trademark, and goodwill in the market.
Fixed Assets
A fixed asset is a long-term asset, that holds for many years (more than a year). These fixed assets include factories, plants, business offices, equipment, machines, etc. However in accounting, the value of his assets tends to fall with time due to depreciation, however, the cost of land on which these fixed assets are installed tends to increase with time.
Financial Assets
Financial assets refer to the investment made in the stocks of other companies, bank investments, preferred equity, corporate and sovereign bonds, etc. The actual value of financial assets is not fixed as it varies with the ups and downs of the market.
What is an Asset? Definition, Types, and Examples
In our day-to-day life, we very often refer to many things as an asset, and this is because it’s a very generalized term. But in terms of business and accounts, an asset has a specific meaning which is further categorized into several parts. Usually, an organization describes an Asset as something that holds an economic value and can turn profitable for the organization in the future.