When we talk about a company, or any business, assets are said to be one of the most important elements that defines the worth assets are simply the resources or different elements holding a high value and worth owned by the business itself. Assets are can be defined as expenses which are prepaid in nature, these are not utilized and used by the company till date. Assets are of multiple types. A business can have a number of different assets, and assets can vary from one business to another depending on the nature of the business. These are the costs which are paid by the company in advance and not utilized, which means they have a great futuristic value and worth making an important part of the business.
These assets are recorded in the book keeping; the assets are normally calculated at the worth. Multiple asses can depreciate over time which has to be adjusted in the accounting books and sheets.
The accounting equation helps understand the value of assets greatly in business. Deducting liabilities of the business from the assets can give you the owner’s equity or share in the business. Similarly, if you add the liabilities and the owner’s equity you can calculate the worth of all your assets combined.
Types Of Assets In The Business
Business by nature has different types of assets each of which are divided into two broad spectrums. The first one being Current Assets and the second is Fixed Assets.
Current assets include the entire assets which can be readily converted into cash anytime, majorly within the time span of one fiscal or business year. The main purpose of these assets is to finance the everyday business activities to ensure a smooth sailing.
The most common types of current assets include cash and the most readily convertible cash equivalents such as cash itself, bank balance, COD’s and other such equipment. It also includes marketable securities which are the debts issued by the business to other businesses, debt certificates, and other equity which is highly liquid and can be cashed out anytime for use. Inventory is yet another part of current assets which includes the raw materials or the goods which are ready for sale.
Fixed assets are typically the opposite of current assets, often called non-current assets. The assets are of a much greater value and are not readily convertible into cash. Typically, such assets include land, machinery and plants. These are tangible and long-term assets which are not converted into cash within the year. They are in the business cycle for the long term. The most common non-current assets are vehicles including trucks or other heavy motors, the furniture of the office. These also include plants, equipment and machineries which are used in production for the business. The land is another example of a fixed asset.
Assets are one of the most basic and important elements in establishing the business. Consequently, they ensure the smooth running of all business activities and aid majorly in business production.