Examples of Assets

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Table Of Contents

Assets Definition

An asset is a resource owned or controlled by an individual or an economic entity which gives them financial returns. They are also assessed in terms of their value that can be converted into cash, often referred to as liquidity. The economic value could be immediate or can be experienced at a future date.

In contrast, liabilities are payments that are owed by the individual or an organization. Examples of assets include all current, capital, and intangible assets owned by a company and used for accounting purposes. For example, cash, accounts receivable, building, plant and equipment, goodwill, and patents.

Examples of Assets Explained

Examples of assets refer to tangible, intangible, and intellectual properties of an individual, organization, or a government that adds economic value. They can be spread across different asset classes depending on their requirements and whims and fancies.

Some of the most common examples of such assets are:

Cash
Temporary Investments
Accounts Receivables
Inventory
Prepaid Insurance
Property, Plant & Equipment
Land
Buildings
Goodwill
Trademark:
Patents
Copyrights

Assets can be divided into subcategories which are mentioned below

Examples

Let us understand the examples of assets through the detailed explanation of each of these examples.

#1 - Current Assets (Short Term in Nature)

Cash: It includes the bank balance and cash available in the business.
Temporary Investments: It includes investment in short term money market instruments, debt instruments, mutual funds, or investments in the public equity of other businesses. The intent here is to park surplus cash in more productive places than bank accounts to yield a higher return from your investments over a short period.
Accounts Receivables: It includes receipt claims from your customers for future payment of your credit sale.
Inventory: It includes the business's stock like for an automobile company; cars produced will be their inventory as their main motive is to sell them.
Prepaid Insurance: This may sound unusual, but our short-term asset is the insurance premium we pay in advance. It helps us mitigate any contingent liability that may arise in the future from that item against which we took insurance. Let's take the example of auto insurance; we take it because if an accident happens, the auto insurance company will pay us for the damages, thereby reducing our hassle. For that, they charge an annual premium. Hence, it is a short-term asset for us.

#2 - Capital Assets (Long Term in Nature)

Property, Plant & Equipment: It includes all the properties/offices, plants/factories, and equipment/machinery/furniture owned by the company and whose benefit can be enjoyed for the long term. For example-factories, plants, machinery, furniture, and other equipment.
Land: It includes a plot that can be used to build your office or factory, which can help you run your operations.
Buildings: We need land to construct buildings that can be further used for other commercial activities.

#3 - Intangible Assets (They can be either Long Term or Short Term in Nature)

There are mainly four intangible assets which generally show up in the balance sheet most of the times, and they are mentioned below:

Goodwill: It represents and quantifies the brand value that the company creates for itself throughout its business. It represents that the company's customer base is loyal and will come back to purchase the product again from the same company. Let's take the example of companies like Apple, Nike, Tesla, IKEA, etc. In the case of Apple, which makes smartphones charge a premium over other comparable devices because of their goodwill, this makes people come back, again and again, to purchase the phone from Apple only.
Trademark: It is the business logo that creates a special image in the minds of its customers. We can again look at the logo of Apple, which indicates a level of superiority over other phones, and that is why people owning that product think that they own something special. It also shows the brand's philosophy, like in the case of the Hyundai logo; they have tried to show two people shaking hands, highlighting the company's focus on customer needs and satisfaction.
Patents: They are the inventions the company makes. Since they have invested heavily to bring out something new, no other company can use it without the inventor's permission over a specific period (generally 20 years). For example, various technological innovations done by companies like Apple, Google, and Motorola are held as patents in their books. Their competitors cannot copy them for a certain period, and the only way to use them is to take permission from the inventor and pay a royalty over their usage.
Copyrights: They also create certain items like songs, movies, and photographs, which can only be used by other people after taking permission from their creator. For example, one of the companies by the name "Getty Images" is purchasing photographs and videos from the photographers and then selling them to a wide variety of audiences at a very nominal fee compared to what they have paid to the original photographer.

So these are some of the intellectual properties that the businesses can own. We cannot see them physically but can rather feel their impact on our lives.

In all the above cases, usage is the most important aspect in determining whether an item should be considered a current or capital asset. Below are some examples of Assets in accounting that will illustrate the change in nature of an item with the change in the intent for its usage:

House or land: It is a long-term asset for most of us because it requires a huge investment and it will provide benefits over a long course of time, but for real estate developers (like- DLF, Trump, etc.), it is considered as their inventory because they are in in the business of purchase/sale of land and houses. Similarly, even for property dealers, it will be their inventory.
Furniture: It is a long-term asset for us but furniture manufacturers (like- IKEA, etc.), and for furniture showrooms, it will be a part of their inventory.
Cars: It is also a long-term asset for us, but for Automobile companies (like- Ford, Toyota, etc.) and car showrooms, it will be a part of their inventory.

So what matters is how you use and perceive, which will determine the classification of assets in your balance sheet.