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What Are Assets?

March 4, 2013

businessman doing financials

When reading financial statements you’ll need to have a firm grasp of assets. So what are assets? They are tangible or intangible possessions that have economic value. In personal finance they are usually tangible things such as bank accounts, funds, material possessions (like cars, jewelry, or equity in a home). Your personal net worth is the value of your assets minus the value of your liabilities (what you owe).

In business, assets are used in a balance sheet in the positive side of the ledger. Typical assets included on a balance sheet would be cash accounts, accounts receivable, inventory, prepaid expenses, fixed assets (such as land, buildings, and equipment) and intangible assets such as intellectual property (patents and trademarks). Intangible assets are often harder to value than tangible assets. On the balance sheet assets are offset by liabilities. Securities and funds are generally backed up by assets. Businesses need to pay close attention to their assets to get the most return on investment.

For more on what are assets including the different types of assets and how they are defined, click here for a print-friendly, handy cheat sheet.

 Adapted from Finance and Accounting for Nonfinancial Managers, Third Edition, by Eliot H. Sherman.  

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American Management Association is a world leader in professional development, advancing the skills of individuals to drive business success. AMA’s approach to improving performance combines experiential learning—“learning through doing”—with opportunities for ongoing professional growth at every step of one’s career journey. AMA supports the goals of individuals and organizations through a complete range of products and services, including seminars, Webcasts and podcasts, conferences, corporate and government solutions, business books and research.

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