Assets
Definition
Assets are resources owned by a company that have economic value and can provide future benefits. They are listed on the balance sheet and classified as either current or non-current.
5 Must Know Facts For Your Next Test
- Assets are divided into two main categories: current assets and non-current assets.
- Current assets are expected to be converted into cash or used up within one year, such as cash, accounts receivable, and inventory.
- Non-current assets, also known as fixed or long-term assets, include property, plant, equipment, and intangible assets like patents.
- The balance sheet equation is Assets = Liabilities + Equity.
- Depreciation affects the value of tangible non-current assets over time.
Review Questions
- What are the two main categories of assets?
- How do current assets differ from non-current assets?
- What is the balance sheet equation?
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Related terms
Liabilities: Liabilities are financial obligations a company owes to outside parties.
Equity: Equity represents the owner's claim after all liabilities have been deducted from the total assets.
Depreciation: Depreciation is the allocation of the cost of a tangible asset over its useful life.
