What Are Assets in Accounting?
Assets & Depreciation
Explained Simply
This follows the IFRS Conceptual Framework idea of an asset as a present economic resource controlled by the entity. Assets are listed on the balance sheet. Current assets are expected to turn into cash within 12 months: cash at bank, accounts receivable (debtors) and inventory. Non-current assets are held for longer use, such as buildings, vehicles, equipment and software, and are covered under fixed assets. Most fixed assets lose value over time, which is recorded through depreciation. The balance sheet equation is assets equal liabilities plus equity, so every asset is funded either by what the business owes or by what the owners put in.
Related Terms
- Fixed AssetA fixed asset (also called a non-current or tangible asset) is a long-term physical asset owned by a business that is used in operations and not intended for sale, such as buildings, vehicles, machinery, or equipment.
- DepreciationDepreciation is the systematic allocation of a fixed asset's cost over its useful life, reflecting the asset's wear and tear, obsolescence, or decline in value.
- Balance SheetA balance sheet is a financial statement that shows a business's assets, liabilities, and equity at a specific point in time, following the equation: Assets = Liabilities + Equity.
- LiabilitiesLiabilities are the amounts a business owes to other parties, arising from past events and expected to be settled by paying cash or transferring goods or services.
- Accounts ReceivableAccounts receivable (also called debtors) is the money owed to a business by its customers for goods or services that have been delivered but not yet paid for.