Asset Types and Their Definitions
Written by True Tamplin, BSc, CEPF®
Updated on March 30, 2021
What Are the Four Categories of Assets?
The four main categories of assets examples are:
- Short Term (or Current) Assets: These are assets that a company expects to be able to convert into cash within one year. This includes cash and cash equivalents, inventory, accounts receivable, and some prepaid expenses.
- Financial Investments: Investments in assets and securities, such as stocks and bonds, also count towards a company’s assets.
- Fixed-Assets: These are long-lived items like equipment and real estate. In contrast to short term assets, fixed assets are expected to last beyond a year. A fixed asset is often a capital expenditure. Although the business will incur the expense year one, the expense will generally be incurred evenly over the useful lifetime of the asset on financial statements.
- Intangible Assets: Resources with value but without substance fall into this category, such as trademarks, patents, and intellectual property.
What Are Considered Assets?
Assets are recorded on a company’s balance sheet along with liabilities and equity.
Equity refers to the amount of money contributed by shareholders, plus retained earnings (or losses).
Liabilities are balances that effectively reduce a company’s overall spending power, such as outstanding loans or debt.
For accounting purposes, a company’s value is equal to their assets minus their liabilities.
Asset Examples
When a company spends cash on an asset, the value of the “assets”section of the balance sheet remains the same.
As an example, if a company spends $10,000 in cash on a new vehicle, their cash is reduced by $10,000 but they gain an asset worth the same amount.
Before accounting for depreciation, the total value of their assets remains the same.
Types of Assets and Liabilities
The two main types of assets and liabilities are long-term and current.
The economic value provided by long-term assets is typically used to pay long-term liabilities, and the economic value provided by current assets is used to pay current liabilities.
For example, large loans may be paid with revenue-generating PP&E, while dividends are paid with cash.
Assets in Accounting
When company accountants draw up forms, assets are compiled and listed in the balance sheet along with liabilities and equity.
Assets are divided into two main categories, long-term and current, and then further categorized by type.
It is important for a company to make sure that its total assets exceed its total liabilities.
Types Of Fixed Assets
Fixed assets are long-term assets with a significantly long economic lifespan.
Plants, property, and equipment, or PP&E, is one of the most ubiquitous examples of fixed-assets.
Depending on the industry of the business in question, they may have a lot or only a few fixed-assets.
Intangible Assets
Intangible assets are non-physical items which nonetheless provide a company with economic value. Examples would be patents, intellectual property, trademarks, and so on. Intangible assets are almost universally long-term assets rather than current assets.
Intangible assets may comprise a lot or a little of a company’s net worth, depending on the industry.
Valuation of Different Types of Assets
Companies and investors must determine the fair market value of certain assets differently than others depending on type.
PP&E and most other physical assets are easy to value since the cost of acquisition and repairs are known.
However, intangible assets such as intellectual property need more subjective valuation methods, such as calculated intangible value (CVI).
Types Of Current Assets
Current assets are a specific type of asset that will provide economic value to their owning company for or within one year. As such they are also often the most liquid assets.
Some types of current assets are cash and cash equivalents, short-term investments, inventory (if applicable), and accounts receivable.
Types Of Liabilities
Just like assets, liabilities can be either long-term or short term. Some common long-term liabilities are bank loans, deferred income taxes, and bonds payable.
Common current liabilities are accounts payable, short-term debts, dividends, and non-deferred income taxes.
Liabilities are recorded on the balance sheet along with assets and equity.
Types of Assets FAQs
Assets Definition
What Is an Asset vs Equity vs Liability?
Assets are recorded on a company’s balance sheet along with liabilities and equity.
Equity refers to the amount of money contributed by shareholders, plus retained earnings (or losses).
Liabilities are balances that effectively reduce a company’s overall spending power, such as outstanding loans or debt.
What Are Assets in Accounting?
For accounting purposes, a company’s value is equal to their assets minus their liabilities.
What Does Asset Mean Practically? A Helpful Example
When a company spends cash on an asset, the value of the “assets”section of the balance sheet remains the same.
As an example, if a company spends $10,000 in cash on a new vehicle, their cash is reduced by $10,000 but they gain an asset worth the same amount.
Before accounting for depreciation, the total value of their assets remains the same.
Assets Examples
Some examples of assets include:
- Property, plants, and equipment (PP&E), which covers everything from heavy machinery to building space
- Inventory
- Investments
- Accounts receivable
- Cash and cash equivalents
- Anything else that counts towards a company’s overall net worth or spending power
Personal Assets
Personal assets refers to assets owned personally by an individual. Examples would be things like a vehicle, home, savings account, equity owned, and anything else that counts towards one’s overall net worth.
As with business assets, personal assets can have varying degrees of liquidity.
Assets and Liabilities
Liabilities are essentially the opposite of an asset; they are anything that counts against a company’s overall net worth.
Examples would be debts taken on, such as by issuing bonds, wages owed, taxes owed, and so on. Liabilities are often measured against assets. If liabilities exceed assets, it indicates a financial problem.
Types Of Assets
The two major types of assets are long-term and short-term assets.
Long-term assets, which may also be called fixed-assets, is anything with an economically useful life of more than one year. A short-term asset, or current asset, is anything with an economically useful life of one year or less.
List of Assets
A list of company assets can usually be found on the balance sheet. The assets may be categorized by type, such as plants, property, and equipment (PP&E), long-term investments, intangible assets, and so on.
Current Assets
Current assets, also called short-term assets, are a specific type of asset unique in the fact that they can only provide value for or within one year.
Examples would be short-term investments (that will be cashed with a year), inventory, and cash and cash equivalents.
Other Questions About Assets:
An asset is a resource that a company owns that provides economic value. such as cash, equipment, property, rights or anything that a company can expect to generate revenue or reduce expenses.
What are the main types of assets?
The four main types of assets are: short term assets, financial investments, fixed assets and intangible assets.
What are some examples of Assets?
Some examples of assets include: property, plants, and equipment (PP&E), which covers everything from heavy machinery to building space,
inventory, investments, accounts receivable and cash and cash equivalents
How does a Liability differ from an Asset?
Liabilities are essentially the opposite of an asset; they are anything that counts against a company’s overall net worth.