Examples of Assets in Accounting

Below are examples of the most common assets in accounting.

Assets can be divided into subcategories which are mentioned below

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Examples of Assets

#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 instrumentsDebt InstrumentsDebt instruments provide finance for the company’s growth, investments, and future planning and agree to repay the same within the stipulated time. Long-term instruments include debentures, bonds, GDRs from foreign investors. Short-term instruments include working capital loans, short-term loans.read more, 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 liabilityContingent LiabilityContingent Liabilities are the potential liabilities of the company that may arise at some future date as a result of a contingent event that is beyond the company’s control. read more 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 Intangible AssetsIntangible Assets are the identifiable assets which do not have a physical existence, i.e., you can’t touch them, like goodwill, patents, copyrights, & franchise etc. They are considered as long-term or long-living assets as the Company utilizes them for over a year. read more which generally show up in the balance sheet most of the times, and they are mentioned below:

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.

This article has been a guide to Examples of Assets in Accounting. Here we discuss the most common classification of assets in accounting, including Current Assets, Capital Assets, and Intangible Assets. You may learn more about accounting from the following articles –

  • Short Term AssetsExamples of Intangible AssetsAsset Accounts OverviewExamples of Current Assets