Types of Assets
Assets are classified into many groups depending on specified criteria. These are their names:
1. Convertible into Cash
When categorising assets according to their financial convertibility, assets are categorised as either current assets or fixed assets. This concept can also be expressed as the contrast between short-term and long-term assets.
A. Current Assets: Current assets are those that are readily convertible into cash or cash equivalents, usually within a period of one year. They are sometimes referred to as liquid assets. e.g Cash, Short-term deposits, Inventory, Marketable securities, Accounts receivables, Cash equivalents and Office supplies.
B. Fixed or Non-Current Assets: Noncurrent assets are those that are not readily convertible into cash or cash equivalents on a short-term basis. Hard assets, long-term assets, and fixed assets are alternative names for noncurrent assets. The following are instances of noncurrent or fixed assets:Land, Trademarks, Building, Equipment, Machinery and Patents.
2. Tangible Existence
This criterion categorises assets as either physical or intangible. Tangible assets have a physical shape and can be used as collateral for company loans. Tangible assets include land, machinery, buildings, and equipment, among other things. Intangible assets, on the other hand, do not have a physical form but can create money for the business. Intangible Assets include things like goodwill, copyright, trademarks, patents, licences, and permissions.
A. Physical Assets : Physical assets are tangible assets; they are objects that can be seen, touched, and felt. Instances of tangible assets consist of: Land, Machinery, Equipment, Office supplies, Cash, Building, Inventory, Marketable securities etc.
B. Intangible Assets : Intangible assets are those which do not have a tangible form. The following are examples of intangible assets: Goodwill, Brand, Patents, Trademarks, Copyrights, Trade secrets.
3. Usage
This category classifies assets as either operating or non-operating. Operating assets are assets that a company requires for the normal functioning of their business in order to produce revenue.
A. Operating Assets : Operating assets are assets that are required in the daily operation of a business. In other words, operating assets are used to generate revenue from a company’s core business activities. It includes inventory, property, receivables, machinery, assets, patents, goodwill, copyrights, and so on.
B. Non-Operating Assets : They are not required for ordinary business operations, and the company can produce revenue. Non-operating assets include short-term investments, empty land and property, convertible bonds, interest income, and so on.