ECONOMICS | Strayer University, Washington

ASSETS • An asset is a resource that has economic value that an individual, corporation or a country owns or controls with the expectation of getting a future benefit. • They are usually reported on a company's balance sheet and are created or bought to increase a firm's value hence benefiting the firm's operations. • An asset may be thought of as something which, in the future, can generate cash flow, improve sales or reduce expenses regardless of whether it's manufacturing equipment or a patent. TYPES OF ASSETS 1. Current Assets They are short-term economic resources which are expected to be converted into cash within one year. They include accounts receivable, cash and cash equivalents, inventory and various prepaid expenses. Though cash is easy to value, accountants periodically reassess the recoverability of inventory and also accounts receivable. If there is evidence which accounts receivable may be uncollectible, it becomes impaired. If inventory becomes obsolete, companies can write off these assets. Assets are recorded on balance sheets of companies based on the concept of historical cost, that represents the original cost of the asset, adjusted for any improvements. 2. Fixed Assets These are long-term resources, such as plants, equipment, and also buildings. Adjustment for the aging of fixed assets is made depending on periodic charges called depreciation, which can or can not reflect the loss of earning powers for a fixed asset. 3. Financial Assets These represent investments in the assets and securities of the other institutions. They include stocks, preferred, equity sovereign and corporate bonds and other hybrid securities. Financial assets are valued depending on the way investment is categorized and the motive behind it. 4. Intangible Assets These are economic resources which have no physical presence. They include trademarks,...

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