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

1. Assets are divided into two main categories: current assets and non-current assets.
2. Current assets are expected to be converted into cash or used up within one year, such as cash, accounts receivable, and inventory.
3. Non-current assets, also known as fixed or long-term assets, include property, plant, equipment, and intangible assets like patents.
4. The balance sheet equation is Assets = Liabilities + Equity.
5. 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?

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.