The exercise of accounting requires knowledge of certain basic notions. Today, we wanted to stop to talk about one of them. So we will dedicate the next few lines to determining what are assets in accounting.
Join us and learn more about this interesting topic!
Any financial analysis focuses its study on the elements that represent an asset for the organization. To better understand what we mean, we invite you to read the development of this article.
What will you find here?
What are assets in accounting? Definition
They are understood as the set of goods, rights and resources in general that generate benefits or provide economic returns. In other words, they are goods that the businessorganization or that a private person owns and that can be converted into monetary gains.
So, to determine what are assets in accounting, it is important to bear in mind that for an element to be considered an asset, it is a requirement that it generate economic returns with total reliability or, failing that, with a high degree. Some examples of assets that can be mentioned to better exemplify the subject are:
- Investments in land, buildings, bonds, machinery, among others.
- Sales made.
- Money available in bank accounts, etc.
Now, while the goods and resources that generate contributions are designated as assets, the elements that generate losses or represent expenses in the accounting and financial area are considered as liabilities.
The accounting equation to determine the assets is:
Active = Passive + Capital (or Equity, or Own Funds).
While the difference between assets and liabilities is what is known as the stockholders’ equity.
Assets can be classified according to their liquidity, that is, according to the ease with which monetary benefits can be enjoyed. Based on this, the assets can be:
Also known as non-current assets or fixed assets, they are all those elements that are intended to serve or endure in a lasting way in financial activities, that is, they are kept beyond a year or, what is the same, a period of short term.
Fixed assets can be divided into different categories:
- Materials: corresponds to land, buildings, machinery, installations, furniture, vehicles…
- intangible assets: they are non-material goods, they are usually represented in rights that the company or a particular person has in relation to patents, trademarks, recognition of intellectual property or use, among others.
- Financial: they refer to financial investments that can be executed in the name of the organization or personal firm.
The current assets they are linked to the normal operating cycle, they contemplate all those elements that the company expects to sell or negotiate in a period of less than twelve months. It includes accounts receivable, short-term investments, available cash, as well as any other type of liquid assets.
Finally, we can say that at the accounting level, when talking about what are assets in accounting reference is made to all those elements that have the capacity to generate liquidity. Like the liabilities, it is one of the essential aspects for recording the ledger accounts.
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