Assets are the resources that a business owns or controls, and they are expected to provide future economic benefits. They can be tangible, like physical items you can touch, or intangible, like rights or intellectual property.
Here are the main categories of assets:
- Current Assets: These are assets that are expected to be converted into cash or used up within one year or the operating cycle of the business, whichever is longer. They include:
- Cash and Cash Equivalents: This includes cash in hand and funds in bank accounts that are readily available for use.
- Accounts Receivable: These are amounts owed to the business by customers for goods or services provided on credit.
- Inventory: This includes goods held for sale in the ordinary course of business, such as raw materials, work-in-progress, or finished goods.
- Prepaid Expenses: These are expenses paid in advance, such as insurance premiums or rent, which represent future economic benefits.
- Non-Current Assets (or Long-Term Assets): These are assets expected to provide economic benefits beyond the current year. They include:
- Property, Plant, and Equipment (PP&E): These are tangible assets used in the operations of the business, such as land, buildings, machinery, and vehicles.
- Investments: This includes long-term investments in stocks, bonds, or other securities held for capital appreciation or interest income.
- Intangible Assets: These are assets without physical substance, such as patents, copyrights, trademarks, goodwill, or software.
Now, let’s take the lemonade stand example in more detail:
- Cash: This is the money you have in your lemonade stand’s cash register, which you can use to buy more supplies or pay for expenses.
- Inventory: These are the lemons, sugar, cups, and any other ingredients or materials you have on hand to make and sell lemonade. They represent the value of the goods you’re ready to sell.
- Equipment: This includes the pitcher, stirring spoon, juicer, and table you use to make and sell lemonade. These are assets because they help you run your business and make money.
You may take the free Accounting Foundation Course, enroll here
Allen
June 14, 2024Thanks
Marcia
June 14, 2024Thanks for sharing
Bernard
June 15, 2024Nice Article.
Alina
June 15, 2024Hi to every one, the contents present at
this web page are genuinely amazing for people knowledge, well, keep
up the nice work fellows.
Logan
June 16, 2024What’s up, of course this piece of writing is really fastidious and have learned lot of things from it regarding blogging.
thanks.
Allen
June 21, 2024Good Information
Mercia
June 21, 2024Thanks for sharing.